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Games for cautious players: the equilibrium in secure strategies

Author

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  • Mikhail Iskakov
  • Alexey Iskakov
  • Claude d'Aspremont

Abstract

A non-cooperative solution, the Equilibrium in Secure Strategies (EinSS), is defined as an extension of the Nash equilibrium in pure strategies, and is meant to solve games where players are “cautious,” i.e., looking for secure positions and avoiding threats. This concept abstracts and unifies ad hoc solutions already formulated in various applied economic games that have been discussed extensively in the literature. A general existence theorem is provided and then applied to the price-setting game in the Hotelling location model, to Tullock's rent-seeking contests, and to Bertrand–Edgeworth duopoly. Finally, competition in the insurance market game is re-examined and the Rothschild–Stiglitz–Wilson contract is shown to be an EinSS even when the Nash equilibrium breaks down.
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Suggested Citation

  • Mikhail Iskakov & Alexey Iskakov & Claude d'Aspremont, 2018. "Games for cautious players: the equilibrium in secure strategies," LIDAM Reprints CORE 2966, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2966
    Note: In : Games and Economic Behavior, 28(1), 110, 58-70, 2018
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    References listed on IDEAS

    as
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    Cited by:

    1. Edwards, Robert A. & Routledge, Robert R., 2022. "Information, Bertrand–Edgeworth competition and the law of one price," Journal of Mathematical Economics, Elsevier, vol. 101(C).
    2. Iskakov, M., 2022. "Existence theorems for Nash equilibrium and equilibrium in secure strategies," Journal of the New Economic Association, New Economic Association, vol. 56(4), pages 12-27.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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