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Author’s VersionCC BY-NC-ND V4.0, Open Access
Journal article
Behavior in the centipede game: A decision-theoretical perspective
Economics Letters, Vol.133(August), pp.117-122
2015
Abstract
The centipede game is a two-player finite game of perfect information where a unique subgame perfect Nash equilibrium appears to be intuitively unappealing and descriptively inadequate. This paper analyzes behavior in the centipede game when a traditional game-theoretical assumption that players maximize expected utility is relaxed. We demonstrate the existence of a descriptively adequate subgame perfect equilibrium under two standard decision-theoretical assumptions. First, players choose under uncertainty in a probabilistic manner as captured by embedding a core deterministic decision theory in a model of probabilistic choice. Second, players adopt non-linear decision weights and overweight the likelihood of rare events as captured, for example, by rank-dependent utility or prospect theory.
Details
- Title
- Behavior in the centipede game: A decision-theoretical perspective
- Authors/Creators
- P. Blavatskyy (Author/Creator) - Murdoch University
- Publication Details
- Economics Letters, Vol.133(August), pp.117-122
- Publisher
- Elsevier
- Identifiers
- 991005544263707891
- Copyright
- Elsevier
- Murdoch Affiliation
- School of Management and Governance
- Language
- English
- Resource Type
- Journal article
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- Citation topics
- 6 Social Sciences
- 6.122 Economic Theory
- 6.122.1287 Risk Preferences
- Web Of Science research areas
- Economics
- ESI research areas
- Economics & Business