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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 2008-31, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
  • Handle: RePEc:ehu:ikerla:6419
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    Cited by:

    1. Juan Carlos Bárcena‐Ruiz & Máximo Sedano, 2011. "Endogenous Timing In A Mixed Duopoly: Weighted Welfare And Price Competition," The Japanese Economic Review, Japanese Economic Association, vol. 62(4), pages 485-503, December.
    2. Iriberri Etxebeste, Nagore & Uriarte Ayo, José Ramón, 2011. "Minority Language and the Stability of Bilingual Equilibria," IKERLANAK 2011-45, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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