Ambiguity and the Centipede Game: Strategic Uncertainty in Multi-Stage Games

45 Pages Posted: 22 Aug 2017

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

Simon Grant

Rice University - Department of Economics; Australian National University

Date Written: August 15, 2017

Abstract

We propose a solution concept for a class of extensive form games with ambiguity. Specifically we consider multi-stage games. Players have CEU preferences. The associated ambiguous beliefs are revised by Generalized Bayesian Updating. We assume individuals take account of possible changes in their preferences by using consistent planning. We show that if there is ambiguity in the centipede game it is possible to sustain `cooperation' for many periods as part of a consistent-planning equilibrium under ambiguity. In a non-cooperative bargaining game we show that ambiguity may be a cause of delay in bargaining.

Suggested Citation

Eichberger, Jürgen and Kelsey, David and Grant, Simon Harold, Ambiguity and the Centipede Game: Strategic Uncertainty in Multi-Stage Games (August 15, 2017). Available at SSRN: https://ssrn.com/abstract=3019441 or http://dx.doi.org/10.2139/ssrn.3019441

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/

Simon Harold Grant

Rice University - Department of Economics ( email )

6100 South Main Street
Houston, TX 77005
United States
713-348-3332 (Phone)
713-348-6329 (Fax)

Australian National University ( email )

Coombs Building 9
Canberra, Australian Capital Territory 0200
Australia
61-2-6125-4602 (Phone)
61-2-6125-3051 (Fax)

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