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| Title: | | Robustness to strategic uncertainty in price competition  |
| Authors: | | Andersson, Ola Argenton, Cédric Weibull, Jörgen W. |
| Issue Date: | | 2010 |
| Series/Report no.: | | SSE/EFI Working Paper Series in Economics and Finance 726 |
| Abstract: | | We model a player's uncertainty about other player's strategy choices as probability distributions over their strategy sets. We call a strategy profile robust to strategic uncertainty if it is the limit, as uncertainty vanishes, of some sequence of strategy profiles in each of which every player's strategy is optimal under his or her uncertainty about the pthers. We apply this definition to Bertrand games with a continuum of equilibrium prices and show that our robustness criterion selects a unique Nash equilibrium price. This selection agrees with available experimental findings. |
| Subjects: | | Nash equilibrium refinement strategic uncertainty price competition |
| JEL: | | C72 D43 L13 |
| Document Type: | | Working Paper |
| Appears in Collections: | | SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics
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