Abstract

Perfect Bayesian Nash equilibrium is the classic solution concept for sequential games with incomplete information. Yet choices may be very suboptimal when the players' priors do not reflect true likelihoods, when players look in hindsight at events that occurred, or when players must justify their choices in front of others with different priors. We propose an alternative solution concept, best compromise equilibrium, that involves making choices that are approximately optimal for all priors at all information sets. It is simple to calculate and, unlike dominant strategy and ex post Nash equilibrium, it always exists. We provide examples, including bilateral trade, bargaining with incomplete information, and Cournot games with uncertain costs.

About the presenter's visit

Professor Karl Schlag will be visiting the School of Economics on 1 November 2019.  While here he will be using room 520A Colin Clark Building.  If you would like to meet with him or have lunch or dinner with him please contact Zachary Breig who will be his host while at The University of Queensland.  Zachary can be contacted on z.breig@uq.edu.au.

About School Seminar Series

School of Economics seminars are the main academic seminar series held on a Friday. These seminars are presented by guest researchers and enable School of Economics academics to network with other academics from around Australia and internationally.

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Venue

Colin Clark building
The University of Queensland
St Lucia campus
Room: 
629 (boardroom)