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Uncertainty aversion and equilibrium existence in games with incomplete information

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  • Azrieli, Yaron
  • Teper, Roee
Abstract
We consider games with incomplete information à la Harsanyi, where the payoff of a player depends on an unknown state of nature as well as on the profile of chosen actions. As opposed to the standard model, playersʼ preferences over state-contingent utility vectors are represented by arbitrary functionals. The definitions of Nash and Bayes equilibria naturally extend to this generalized setting. We characterize equilibrium existence in terms of the preferences of the participating players. It turns out that, given continuity and monotonicity of the preferences, equilibrium exists in every game if and only if all players are averse to uncertainty (i.e., all the functionals are quasi-concave).

Suggested Citation

  • Azrieli, Yaron & Teper, Roee, 2011. "Uncertainty aversion and equilibrium existence in games with incomplete information," Games and Economic Behavior, Elsevier, vol. 73(2), pages 310-317.
    • Handle: RePEc:eee:gamebe:v:73:y:2011:i:2:p:310-317
    DOI: 10.1016/j.geb.2011.03.005
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    More about this item

    Keywords

    Games with incomplete information; Equilibrium existence; Uncertainty aversion; Convex preferences;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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