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Doubts and Equilibria

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  • Cabrales, Antonio
  • Uriarte Ayo, José Ramón

Abstract

In real life strategic interactions, decision-makers are likely to entertain doubts about the degree of optimality of their play. To capture this feature of real choice-making, we present here a model based on the doubts felt by an agent about how well is playing a game. The doubts are coupled with (and mutually reinforced by) imperfect discrimination capacity, which we model here by means of similarity relations. We assume that each agent builds procedural preferences de ned on the space of expected payoffs-strategy frequencies attached to his current strategy. These preferences, together with an adaptive learning process lead to doubt-based selection dynamic systems. We introduce the concepts of Mixed Strategy Doubt Equilibria, Mixed Strategy Doubt-Full Equilibria and Mixed Strategy Doubtless Equilibria and show the theoretical and the empirical relevance of these concepts.

Suggested Citation

  • Cabrales, Antonio & Uriarte Ayo, José Ramón, 2008. "Doubts and Equilibria," IKERLANAK 6419, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    • Handle: RePEc:ehu:ikerla:6419
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    References listed on IDEAS

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