Are the Treasures of Game Theory Ambiguous?

30 Pages Posted: 26 May 2014

See all articles by Jürgen Eichberger

Jürgen Eichberger

Heidelberg University - Alfred Weber Institute for Economics

David Kelsey

University of Exeter Business School - Department of Economics

Date Written: May 24, 2014

Abstract

Goeree and Holt (2001) experimentally study a number of games. In each case they initially find strong support for Nash equilibrium, however by changing an apparently irrelevant parameter they find results which contradict Nash equilibrium. In this paper, we study the five normal form games from Goeree and Holt (2001). We argue that their results may be explained by the hypothesis that subjects view their opponents' behaviour as ambiguous. Ambiguity-aversion causes players to avoid strategies which give low out of equilibrium pay-offs. Similarly ambiguity-preference can make strategies with high pay-offs more attractive.

Keywords: ambiguity, coordination games, experiments, traveller's dilemma, matching pennies, optimism

JEL Classification: C72, D81

Suggested Citation

Eichberger, Jürgen and Kelsey, David, Are the Treasures of Game Theory Ambiguous? (May 24, 2014). Available at SSRN: https://ssrn.com/abstract=2441584 or http://dx.doi.org/10.2139/ssrn.2441584

Jürgen Eichberger

Heidelberg University - Alfred Weber Institute for Economics ( email )

Heidelberg, D-69117
Germany

David Kelsey (Contact Author)

University of Exeter Business School - Department of Economics ( email )

Streatham Court
Exeter, Devon EX4 4PU
United Kingdom
013 9226 2536 (Phone)

HOME PAGE: http://people.exeter.ac.uk/dk210/

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