Kajii, Atsushi: Third Down with a Yard to Go: The Dixit-Skeath Conundrum on Equilibria in Competitive Games
World Conference Econometric Society, 2000, Seattle

Simon Grant, Australian National University
Atsushi Kajii, University of Tsukuba
Ben Polak, Yale University
Third Down with a Yard to Go: The Dixit-Skeath Conundrum on Equilibria in Competitive Games
Session: C-6-6  Sunday 13 August 2000  by Kajii, Atsushi
In strictly competitive games, equilibrium mixed strategies are invariant to changes in the ultimate prizes. Dixit and Skeath argue that this seems counter-intuitive, and it is a challenge to the expected utility theory. We show that this invariance is robust to dropping the independence axiom, but is removed if we drop the reduction axiom. The conditions on the resulting recursive expected-utility model to get the desired outcome are analogous to conditions used in the standard model of comparative statics under risk.
Submitted paper full-text in .pdf


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