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Ambiguity and the Centipede Game: Strategic Uncertainty in Multi-Stage Games

Eichberger, Jürgen ; Grant, Simon ; Kelsey, David

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Abstract

We propose a solution concept for a class of extensive form games with ambiguity. Specifically we consider multi-stage games. Players have CEU preferences. The associated ambiguous beliefs are revised by Generalized Bayesian Updating. We assume individuals take account of possible changes in their preferences by using consistent planning. We show that if there is ambiguity in the centipede game it is possible to sustain 'cooperation' for many periods as part of a consistent-planning equilibrium under ambiguity. In a non-cooperative bargaining game we show that ambiguity may be a cause of delay in bargaining.

Item Type: Working paper
Series Name: Discussion Paper Series
Volume: 0638
Place of Publication: Heidelberg
Date Deposited: 11 Sep 2017 09:29
Date: 15 August 2017
Number of Pages: 45
Faculties / Institutes: The Faculty of Economics and Social Studies > Alfred-Weber-Institut for Economics
Subjects: 330 Economics
Schriftenreihe ID: Discussion Paper Series / University of Heidelberg, Department of Economics
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