Robustness to strategic uncertainty

O. Andersson, C. Argenton, J.W. Weibull

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We introduce a criterion for robustness to strategic uncertainty in games with continuum strategy sets. We model a player's uncertainty about another player's strategy as an atomless probability distribution over that player's strategy set. We call a strategy profile robust to strategic uncertainty if it is the limit, as uncertainty vanishes, of some sequence of strategy profiles in which every player's strategy is optimal under his or her uncertainty about the others. When payoff functions are continuous we show that our criterion is a refinement of Nash equilibrium and we also give sufficient conditions for existence of a robust strategy profile. In addition, we apply the criterion to Bertrand games with convex costs, a class of games with discontinuous payoff functions and a continuum of Nash equilibria. We show that it then selects a unique Nash equilibrium, in agreement with some recent experimental findings.
Original languageEnglish
Pages (from-to)272-288
JournalGames and Economic Behavior
Volume85
Issue numberMay 2014
DOIs
Publication statusPublished - May 2014

Fingerprint

Strategic uncertainty
Robustness
Uncertainty
Nash equilibrium
Probability distribution
Costs

Keywords

  • nash equilibrium
  • refinement
  • strategic uncertainty
  • Bertrand competition
  • log-concavity

Cite this

Andersson, O. ; Argenton, C. ; Weibull, J.W. / Robustness to strategic uncertainty. In: Games and Economic Behavior. 2014 ; Vol. 85, No. May 2014. pp. 272-288.
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Robustness to strategic uncertainty. / Andersson, O.; Argenton, C.; Weibull, J.W.

In: Games and Economic Behavior, Vol. 85, No. May 2014, 05.2014, p. 272-288.

Research output: Contribution to journalArticleScientificpeer-review

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