Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/201609 
Year of Publication: 
2018
Series/Report no.: 
Center for Mathematical Economics Working Papers No. 585
Publisher: 
Bielefeld University, Center for Mathematical Economics (IMW), Bielefeld
Abstract: 
In this paper, we present a model of finitely repeated games in which players can strategically make use of objective ambiguity. In each round of a finite rep- etition of a finite stage-game, in addition to the classic pure and mixed actions, players can employ objectively ambiguous actions by using imprecise probabilistic devices such as Ellsberg urns to conceal their intentions. We find that adding an infinitesimal level of ambiguity can be enough to approximate collusive payoffs via subgame perfect equi- librium strategies of the finitely repeated game. Our main theorem states that if each player has many continuation equilibrium payoffs in ambiguous actions, any feasible pay- off vector of the original stage-game that dominates the mixed strategy maxmin payoff vector is (ex-ante and ex-post) approachable by means of subgame perfect equilibrium strategies of the finitely repeated game with discounting. Our condition is also necessary.
Subjects: 
Objective Ambiguity
Ambiguity Aversion
Finitely Repeated Games
Subgame Perfect Equilibrium
Ellsberg Urns
Ellsberg Strategies
JEL: 
C72
C73
D81
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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