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Ambiguity and the Centipede Game: Strategic Uncertainty in Multi-Stage Games

Author

Listed:
  • Jürgen Eichberger

    (Alfred Weber Institut, Universität Heidelberg.)

  • Simon Grant

    (Research School of Economics, Australian National University.)

  • David Kelsey

    (Department of Economics, University of Exeter)

Abstract

We propose a solution concept for a class of extensive form games with ambiguity. Speci?cally we consider multi-stage games. Players have CEU preferences. The associated ambiguous beliefs are revised by Generalized Bayesian Updating. We assume individuals take account of possible changes in their preferences by using consistent planning. We show that if there is ambiguity in the centipede game it is possible to sustain ?cooperation? for many periods as part of a consistent-planning equilibrium under ambiguity. In a non-cooperative bargaining game we show that ambiguity may be a cause of delay in bargaining.

Suggested Citation

  • Jürgen Eichberger & Simon Grant & David Kelsey, 2017. "Ambiguity and the Centipede Game: Strategic Uncertainty in Multi-Stage Games," Discussion Papers 1705, University of Exeter, Department of Economics.
  • Handle: RePEc:exe:wpaper:1705
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    File URL: http://people.exeter.ac.uk/RePEc/dpapers/DP1705.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    optimism; neo-additive capacity; dynamic consistency; consistent planning; centipede game; multi-stage game.;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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