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Mixed strategies and preference for randomization in games with ambiguity averse agents

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  • Calford, Evan M.

Abstract

We study the use of mixed strategies in games by ambiguity averse agents with a preference for randomization. Applying the decision theoretic model of Saito (2015) to games, we establish that the set of rationalizable strategies grows larger as preference for randomization weakens. An agent's preference for randomization is partially observable: given the behavior of an agent in a game, we can determine an upper bound on the strength of randomization preference for that agent. Notably, data in previous experiments on ambiguity aversion in games is not consistent with a maximal preference for randomization for approximately 30% of subjects.

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  • Calford, Evan M., 2021. "Mixed strategies and preference for randomization in games with ambiguity averse agents," Journal of Economic Theory, Elsevier, vol. 197(C).
    • Handle: RePEc:eee:jetheo:v:197:y:2021:i:c:s0022053121001435
    DOI: 10.1016/j.jet.2021.105326
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    Cited by:

    1. Pablo Brañas-Garza & Antonio Cabrales & Maria Paz Espinosa & Diego Jorrat, 2022. "The Effect of Ambiguity in Strategic Environments: an Experiment," Working Papers 196, Red Nacional de Investigadores en Economía (RedNIE).
    2. Calford, Evan M., 2020. "Uncertainty aversion in game theory: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 720-734.
    3. Fabian Bopp & Sara le Roux, 2023. "Social learning under ambiguity - an experimental study," Working Papers Dissertations 110, Paderborn University, Faculty of Business Administration and Economics.

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    More about this item

    Keywords

    Ambiguity aversion; Mixed strategies; Game theory;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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