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Title:Robustness to strategic uncertainty in price competition PDF Logo
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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