IDEAS home Printed from https://ideas.repec.org/p/pur/prukra/1291.html
   My bibliography  Save this paper

Uncertainty Aversion in Game Theory: Experimental Evidence

Author

Listed:
  • Evan Calford

Abstract

This paper experimentally investigates the role of uncertainty aversion in normal form games. Theoretically, risk aversion will a ect the utility value assigned to realized outcomes while ambiguity aversion a ects the evaluation of strategies. In practice, however, utilities over outcomes are unobservable and the e ects of risk and ambiguity are confounded. This paper introduces a novel methodology for identifying the e ects of risk and ambiguity preferences on behavior in games in a laboratory environment. Furthermore, we also separate the e ects of a subject's beliefs over her opponent's preferences from the e ects of her own preferences. The results support the conjecture that both preferences over uncertainty and beliefs over opponent's preferences a ect behavior in normal form games.

Suggested Citation

  • Evan Calford, 2017. "Uncertainty Aversion in Game Theory: Experimental Evidence," Purdue University Economics Working Papers 1291, Purdue University, Department of Economics.
  • Handle: RePEc:pur:prukra:1291
    as

    Download full text from publisher

    File URL: http://www.krannert.purdue.edu/programs/phd/Working-papers-series/2017/1291-Evan-Calford-AGT.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Diecidue, Enrico & Wakker, Peter P, 2001. "On the Intuition of Rank-Dependent Utility," Journal of Risk and Uncertainty, Springer, vol. 23(3), pages 281-298, November.
    2. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
    3. David Kelsey & Sara Roux, 2015. "An experimental study on the effect of ambiguity in a coordination game," Theory and Decision, Springer, vol. 79(4), pages 667-688, December.
    4. Yoram Halevy & Vincent Feltkamp, 2005. "A Bayesian Approach to Uncertainty Aversion," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 449-466.
    5. Carmela Di Mauro & Anna Maffioletti, 2004. "Attitudes to risk and attitudes to uncertainty: experimental evidence," Applied Economics, Taylor & Francis Journals, vol. 36(4), pages 357-372.
    6. Lo, Kin Chung, 2009. "Correlated Nash equilibrium," Journal of Economic Theory, Elsevier, vol. 144(2), pages 722-743, March.
    7. Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2009. "Measuring Strategic Uncertainty in Coordination Games," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 181-221.
    8. Jürgen Eichberger & David Kelsey, 2014. "Optimism And Pessimism In Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 483-505, May.
    9. Jürgen Eichberger & Simon Grant & David Kelsey, 2016. "Randomization and dynamic consistency," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(3), pages 547-566, August.
    10. Mohammed Abdellaoui & Aurelien Baillon & Laetitia Placido & Peter P. Wakker, 2011. "The Rich Domain of Uncertainty: Source Functions and Their Experimental Implementation," American Economic Review, American Economic Association, vol. 101(2), pages 695-723, April.
    11. Bernheim, B Douglas, 1984. "Rationalizable Strategic Behavior," Econometrica, Econometric Society, vol. 52(4), pages 1007-1028, July.
    12. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2003. "Risk averse behavior in generalized matching pennies games," Games and Economic Behavior, Elsevier, vol. 45(1), pages 97-113, October.
    13. P. Battigalli & S. Cerreia‐Vioglio & F. Maccheroni & M. Marinacci, 2016. "A Note on Comparative Ambiguity Aversion and Justifiability," Econometrica, Econometric Society, vol. 84, pages 1903-1916, September.
    14. Yoram Halevy, 2007. "Ellsberg Revisited: An Experimental Study," Econometrica, Econometric Society, vol. 75(2), pages 503-536, March.
    15. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
    16. Jürgen Eichberger & David Kelsey & Burkhard Schipper, 2008. "Granny Versus Game Theorist: Ambiguity in Experimental Games," Theory and Decision, Springer, vol. 64(2), pages 333-362, March.
    17. Ivanov, Asen, 2011. "Attitudes to ambiguity in one-shot normal-form games: An experimental study," Games and Economic Behavior, Elsevier, vol. 71(2), pages 366-394, March.
    18. Eichberger, Jurgen & Kelsey, David, 2000. "Non-Additive Beliefs and Strategic Equilibria," Games and Economic Behavior, Elsevier, vol. 30(2), pages 183-215, February.
    19. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    20. Paul J. Healy & Yaron Azrieli & Christopher P. Chambers, 2016. "Incentives in Experiments: A Theoretical Analysis," Working Papers 16-03, Ohio State University, Department of Economics.
    21. Calford, Evan, 2016. "Mixed Strategies in Games with Ambiguity Averse Agents," MPRA Paper 74909, University Library of Munich, Germany.
    22. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
    23. Epstein, Larry G., 1997. "Preference, Rationalizability and Equilibrium," Journal of Economic Theory, Elsevier, vol. 73(1), pages 1-29, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Matteo M. Marini & Aurora García-Gallego & Luca Corazzini, 2018. "Communication in a threshold public goods game with ambiguity: Anomalies and regularities," Working Papers 2018/03, Economics Department, Universitat Jaume I, Castellón (Spain).
    2. Dudley Cooke & Sara le Roux, 2016. "Strategic Ambiguity and Decision-making: An Experimental Study," Discussion Papers 1605, Exeter University, Department of Economics.

    More about this item

    Keywords

    Ambiguity Aversion; Game Theory; Experimental Economics; Preferences;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pur:prukra:1291. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Krannert PHD). General contact details of provider: http://edirc.repec.org/data/kspurus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.