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The Maxim Criterion and Randomised Behaviour Reconsidered

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  • Ryan, Matthew

Abstract

Mixed strategy equilibria are often regarded as unconvincing behavioral predictions (eg. Stahl (1988)). Furthermore, while many games possess mixed equilibria, explicit randomization is rare in practice. We argue that both problems arise because conventional game theory excludes maximin behavior. By considering a generalization of Nash equilibrium, we prove that there exist plausible equilibria for 2 x 2 games which involve randomized choice. Interestingly, the randomizing player always adopts a maximin strategy. Maximin behavior is therefore crucial to explaining randomization. We also prove that games with randomized equilibria are non-generic, hence unlikely to be observed in practice.

Suggested Citation

  • Ryan, Matthew, 1999. "The Maxim Criterion and Randomised Behaviour Reconsidered," Working Papers 166, Department of Economics, The University of Auckland.
    • Handle: RePEc:auc:wpaper:166
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    File URL: http://hdl.handle.net/2292/166
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    Keywords

    Maximum criterion; Economics;

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