Paper #1087

Títol:

Minimax regret and strategic uncertainty

Autors:

Ludovic Renou i Karl Schlag

Data:

Abril 2008

Resum:

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

Paraules clau:

Minimax regret, rationality, conjectures, price dispersion, auction

Codis JEL:

C7

Àrea de Recerca:

Microeconomia

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