When Are Mixed Equilibria Relevant?
44 Pages Posted: 5 Sep 2019 Last revised: 21 Dec 2020
Date Written: November 20, 2020
Mixed Nash equilibrium (NE) is a cornerstone of game theory, but its empirical relevance has always been questionable. We study in the laboratory two games whose unique NE is in completely mixed strategies; other treatments include the matching protocol (pairwise random vs population mean matching), whether time is discrete or continuous, and whether players can specify mixtures explicitly or only pure strategy realizations. NE mixes predict observed behavior better than maximin in all treatments, but uniform mixes are better predictors than any equilibrium mixture in many treatments. By contrast, in a control game with a unique NE in pure strategies, the best point prediction is NE. Mixed equilibrium predictions are more useful in population mean matching than in standard pairwise matching. Regret-based sign preserving dynamics capture regularities across all treatments.
Keywords: Nash equilibrium, minimax, mixed strategy, directional learning, laboratory experiment
JEL Classification: C72, C73, C92
Suggested Citation: Suggested Citation