2014

Robustness to Strategic Uncertainty

Reprint No. 2014:22

Author(s): Ola Andersson, Cédric Argenton and Jörgen W. WeibullYear: 2014 Title: Games and Economic Behavior Volume (No.): 85 (May) Pages: 272–288
Online article (restrictions may apply)
Preliminary version


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.


Reference:
Andersson, Ola, Cédric Argenton and Jörgen W. Weibull (2014), "Robustness to Strategic Uncertainty". Games and Economic Behavior 85(May), 272–288.

Ola Andersson

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