Minimax regret and strategic uncertainty
This paper introduces a new solution concept, a minimax regret equilibrium, which allows for the possibility that players are uncertain about the rationality and conjectures of their opponents. We provide several applications of our concept. In particular, we consider price-setting environments and show that optimal pricing policy follows a non-degenerate distribution. The induced price dispersion is consistent with experimental and empirical observations (Baye and Morgan (2004) [4]).
Year of publication: |
2010
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Authors: | Renou, Ludovic ; Schlag, Karl H. |
Published in: |
Journal of Economic Theory. - Elsevier, ISSN 0022-0531. - Vol. 145.2010, 1, p. 264-286
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Publisher: |
Elsevier |
Keywords: | Minimax regret Rationality Conjectures Price dispersion Auction |
Saved in:
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