Trembles in extensive games with ambiguity averse players

Gaurab Aryal, Ronald Stauber

    Research output: Contribution to journalArticlepeer-review

    Abstract

    We introduce and analyze three definitions of equilibrium for finite extensive games with imperfect information and ambiguity averse players. In a setting where players preferences are represented by maxmin expected utility, as characterized in Gilboa and Schmeidler (J Math Econ 18(2):141153, 1989), our definitions capture the intuition that players may consider the possibility of slight arbitrary mistakes. This generalizes the idea leading to trembling-hand perfect equilibrium as introduced in Selten (Int J Game Theory 4(1):2555, 1975), by allowing for ambiguous trembles characterized by sets of distributions. We prove existence for two of our equilibrium notions and relate our definitions to standard equilibrium concepts with expected utility maximizing players. Our analysis shows that ambiguity aversion can lead to behavioral implications that are distinct from those attained under expected utility maximization, even if ambiguous beliefs only arise from the possibility of slight mistakes in the implementation of unambiguous strategies.
    Original languageEnglish
    Pages (from-to)1-40
    JournalEconomic Theory
    Volume57
    Issue number1
    DOIs
    Publication statusPublished - 2014

    Fingerprint

    Dive into the research topics of 'Trembles in extensive games with ambiguity averse players'. Together they form a unique fingerprint.

    Cite this