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Trembles in Extensive Games with Ambiguity Averse Players

  • Gaurab Aryal
  • Ronald Stauber

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We introduce and analyze three definitions of equilibrium for finite extensive games with imperfect information and ambiguity averse players. In a setting where players' preferences are represented by maxmin expected utility as characterized in Gilboa and Schmeidler (1989), our definitions capture the intuition that players may consider the possibility of slight mistakes, analogous to the intuition leading to trembling-hand perfect equilibrium as introduced in Selten (1975). We prove existence for two of our equilibrium notions, and relate our definitions to standard equilibrium concepts with expected utility maximizing players. Our analysis shows that ambiguity aversion can lead to distinct behavioral implications, even if ambiguous beliefs only arise from the possibility of slight mistakes in the implementation of unambiguous strategies.

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File URL: http://cbe.anu.edu.au/researchpapers/econ/wp606.pdf
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Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2013-606.

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Length: 28 Pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:acb:cbeeco:2013-606
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  8. Marciano Siniscalchi, 2006. "Dynamic Choice Under Ambiguity," Discussion Papers 1430, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Aryal, Gaurab & Stauber, Ronald, 2014. "A Note on Kuhn’s Theorem with Ambiguity Averse Players," MPRA Paper 57336, University Library of Munich, Germany.
  10. Azrieli, Yaron & Teper, Roee, 2009. "Uncertainty aversion and equilibrium existence in games with incomplete information," MPRA Paper 17617, University Library of Munich, Germany.
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