Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/190570 
Authors: 
Year of Publication: 
2018
Series/Report no.: 
ZEW Discussion Papers No. 18-055
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Abstract: 
I investigate the decision problem of a player in a game of incomplete information who faces uncertainty about the other players' strategies. I propose a new decision criterion which works in two steps. First, I assume common knowledge of rationality and eliminate all strategies which are not rationalizable. Second, I apply the maximin expected utility criterion. Using this decision criterion, one can derive predictions about outcomes and recommendations for players facing strategic uncertainty. A bidder following this decision criterion in a first-price auction expects all other bidders to bid their highest rationalizable bid given their valuation. As a consequence, the bidder never expects to win against an equal or higher type and resorts to win against lower types with certainty.
Subjects: 
Auctions
Incomplete Information
Informational Robustness
Rationalizability
JEL: 
C72
D81
D82
D83
Document Type: 
Working Paper

Files in This Item:
File
Size
615.28 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.