Strategic cautiousness as an expression of robustness to ambiguity
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- dc.contributor.author Ziegler, Gabriel
- dc.contributor.author Zuazo-Garin, Peio
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2020-05-25T09:27:04Z
- dc.date.available 2020-05-25T09:27:04Z
- dc.date.issued 2019-01-15
- dc.date.modified 2020-05-25T09:25:46Z
- dc.description.abstract Economic predictions often hinge on two intuitive premises: agents rule out the possibility of others choosing unreasonable strategies ( strategic reasoning ), and prefer strategies that hedge against unexpected behavior ( cautiousness ). These two premises conflict and this undermines the compatibility of usual economic predictions with reasoning-based foundations. This paper proposes a new take on this classical tension by interpreting cautiousness as robustness to ambiguity. We formalize this via a model of incomplete preferences, where (i) each player s strategic uncertainty is represented by a possibly non-singleton set of beliefs and (ii) a rational player chooses a strategy that is a best-reply to every belief in this set. We show that the interplay between these two features precludes the conflict between strategic reasoning and cautiousness and therefore solves the inclusion-exclusion problem raised by Samuelson (1992). Notably, our approach provides a simple foundation for the iterated elimination of weakly dominated strategies
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1630
- dc.identifier.citation
- dc.identifier.uri http://hdl.handle.net/10230/44765
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1630
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword game theory
- dc.subject.keyword decision theory
- dc.subject.keyword ambiguity
- dc.subject.keyword knightian uncertainty
- dc.subject.keyword incomplete preferences
- dc.subject.keyword bayesian rationality
- dc.subject.keyword cautiousness
- dc.subject.keyword iterated admissibility
- dc.subject.keyword Microeconomics
- dc.title Strategic cautiousness as an expression of robustness to ambiguity
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper