Equilibria in Games with Prospect Theory Preferences

We study how the framework of classical game theory changes whenthe preferences of the players are described by Prospect Theory (PT)and Cumulative Prospect Theory (CPT) instead of Expected UtilityTheory. Specically, we study the inuence of framing eects and probabilityweighting on the existence and specic structure of equilibriain pure and mixed strategies for nite games.[...]

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Year of publication:	2009-11-12
Authors:	Metzger, Lars P. ; Rieger, Marc Oliver
Institutions:	Institut für Schweizerisches Bankwesen <Zürich>
Subject:	Wahrscheinlichkeitsrechnung \| Erwartungstheorie \| Nash-Gleichgewicht \| Nash equilibrium \| Stochastische Dominanz \| stochastic dominance \| Gewichtung

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1 Introduction
1.1 Games, Utilities and Prospects
1.2 Why Prospect Theory Changes Game Theory
2 Probability Weighting and Mixed Strategies
2.1 Fundamental concepts
2.2 General Existence Results
2.3 Effects of Framing
3 Further Solution Concepts
3.1 Stochastic Dominance and Dominated Strategies in PT
3.2 Best Replies and Nash equilibria in PT
4 Conclusions
A Proofs
Acknowledgement
References

Persistent link: https://www.econbiz.de/10005869074