Mue-Sigma Games

15 Pages Posted: 21 Feb 2015  

Uwe Dulleck

Queensland University of Technology - School of Economics and Finance

Andreas Loeffler

Freie Universität Berlin

Date Written: January 13, 2012

Abstract

Risk aversion in game theory is usually modelled using expected utility, which has been critized early on leading to an extensive literature on generalized expected utility. In this paper we are first to apply μ-σ theory to the analysis of (static) games.

μ-σ theory is widely accepted in the finance literature, using it allows us to study the effect on uncertainty endogenous to the game, i.e. mixed equilibria. In particular, we look at the case of linear μ-σ utility functions and determine the best response strategy. In the case of 2×2- and N×M-games we are able to characterize all mixed equilibria.

Suggested Citation

Dulleck, Uwe and Loeffler, Andreas, Mue-Sigma Games (January 13, 2012). Available at SSRN: https://ssrn.com/abstract=2567645 or http://dx.doi.org/10.2139/ssrn.2567645

Uwe Dulleck

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

Andreas Loeffler (Contact Author)

Freie Universität Berlin ( email )

Boltzmannstr. 20
Berlin, 14195
Germany

HOME PAGE: http://www.andreasloeffler.de

Paper statistics

Downloads
12
Abstract Views
154