Granny Versus Game Theorist: Ambiguity in Experimental Games

Abstract

We report on an experiment in which subjects choose actions in strategic games with either strategic complements or substitutes against a granny, a game theorist or other subjects. The games are selected in order to test predictions on the comparative statics of equilibrium with respect to changes in strategic ambiguity. We find that subjects face higher ambiguity while playing against the granny than playing against the game theorist if we assume that subjects are ambiguity averse. Moreover, under the same assumption, subjects choose more secure actions in games more prone to ambiguity which is in line with the predictions.

Keywords: Knightian uncertainty, Choquet expected utility, equilibrium under ambiguity, strategic uncertainty, experiments

JEL Classification: C70, C72, C90, C91, D80, D81