Expectation-based loss aversion and strategic interaction

• 成果类型: Article
• 署名作者: Dato, Simon; Grunewald, Andreas; Mueller, Daniel; Strack, Philipp
• 署名单位: University of Bonn; University of Wurzburg; University of California System; University of California Berkeley
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2017.06.010
• 发表日期: 2017
• 页码: 681-705
• 关键词: non-cooperative games; Expectation-based loss aversion; reference-dependent preferences; Mixed strategies

摘要

By extending the equilibrium concepts of Koszegi and Rabin (2006, 2007), this paper analyzes the strategic interaction of expectation-based loss-averse players. For loss-averse players with choice-acclimating expectations, the utility from playing a mixed strategy is not linear but convex in the probabilities they assign to their pure strategies. As a consequence, they are generally unwilling to randomize and an equilibrium may fail to exist. For players with choice-unacclimating expectations, by contrast, randomizing over their pure strategies may indeed constitute a credible best response and an equilibrium always exists. Building upon these insights, we delineate how expectation-based loss averse players differ in their strategic behavior from their counterparts with standard expected-utility preferences, derive novel strategic effects, discuss equilibrium selection, and derive equilibrium play for some simple games. (C) 2017 Elsevier Inc. All rights reserved.