Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81528
Authors: 
Andersson, Ola
Argenton, Cédric
Weibull, Jörgen W.
Year of Publication: 
2012
Series/Report no.: 
IFN Working Paper 910
Abstract: 
In games with continuum strategy sets, we model a player’s uncertainty about another player’s strategy, as an atomless probability distribution over the other player’s strategy set. We call a strategy profile (strictly) robust to strategic uncertainty if it is the limit, as uncertainty vanishes, of some sequence (all sequences) of strategy profiles in which every player’s strategy is optimal under his or her uncertainty about the others. General properties of this robustness criterion are derived and it is shown that it is a refinement of Nash equilibrium when payoff functions are continuous. We apply the criterion to a class of Bertrand competition games. These are discontinuous games that admit a continuum of Nash equilibria. Our robustness criterion selects a unique Nash equilibrium, and this selection agrees with recent experimental findings.
Subjects: 
Nash equilibrium
Refinement
Strategic uncertainty
Bertrand competition
Log-concavity
JEL: 
C72
D43
L13
Document Type: 
Working Paper

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