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Minimax regret and strategic uncertainty

By Ludovic Renou and Karl H. Schlag

Abstract

This paper introduces a new solution concept, a minimax regret\ud equilibrium, which allows for the possibility that players are uncertain\ud about the rationality and conjectures of their opponents. We provide\ud several applications of our concept. In particular, we consider pricesetting\ud environments and show that optimal pricing policy follows a\ud non-degenerate distribution. The induced price dispersion is consistent\ud with experimental and empirical observations (Baye and Morgan\ud (2004))

Topics: minimax regret, rationality, conjectures, price dispersion, auction
Publisher: Dept. of Economics, University of Leicester
Year: 2008
OAI identifier: oai:lra.le.ac.uk:2381/7476

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