Reinterpreting Mixed Strategy Equilibria: A Unification of the Classical and Bayesian Views
We provide a new interpretation of mixed strategy equilibria that incorporates both von Neumann and Morgenstern's classical concealment role of mixing as well as the more recent Bayesian view originating with Harsanyi. For any two-person game, G, we consider an incomplete information game, IG, in which each player's type is the probability he assigns to the event that his mixed strategy in G is 'found out' by his opponent. We show that, generically, any regular equilibrium of G can be approximated by an equilibrium of IG in which almost every type of each player is strictly optimizing. This leads us to interpret i's equilibrium mixed strategy in G as a combination of deliberate randomization by i together with uncertainty on j's part about which randomization i will employ. We also show that such randomization is not unusual: For example, i's randomization is nondegenerate whenever the support of an equilibrium contains cyclic best replies.
|Date of creation:||12 Feb 2004|
|Date of revision:||12 Feb 2004|
|Contact details of provider:|| Web page: http://www.economics.ubc.ca/|
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