Regret Equilibria in Games

CentER Discussion Paper Series No. 1998-19

Posted: 2 Dec 1998

See all articles by E.J.R. Droste

E.J.R. Droste

Tilburg University, CentER

Michael Kosfeld

Goethe University Frankfurt; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); University of Bonn - Center for Development Research (ZEF)

Mark Voorneveld

Stockholm School of Economics - Department of Economics

Date Written: 1998

Abstract

We study boundedly rational players in an interactive situation. Each player follows a simple choice procedure in which he reacts optimally against a combination of actions of his opponents drawn at random from the distribution generated by a player's beliefs. By imposing a consistency requirement we obtain an equilibrium notion which we call regret equilibrium. An existence proof is provided and it is shown that the concept survives the iterated elimination of never-best responses. Additional properties are studied and the regret equilibrium concept is compared with other game theoretic solution concepts. The regret equilibrium concept is illustrated by means of interesting examples. It is shown that in the centipede game, players will continue to play with large probability.

JEL Classification: C72

Suggested Citation

Droste, Edward J.R. and Kosfeld, Michael and Voorneveld, Mark, Regret Equilibria in Games (1998). CentER Discussion Paper Series No. 1998-19, Available at SSRN: https://ssrn.com/abstract=137982

Edward J.R. Droste

Tilburg University, CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2324 (Phone)
+31 13 466 3072 (Fax)

Michael Kosfeld

Goethe University Frankfurt ( email )

Faculty of Economics and Business Administration
Theodor-W.-Adorno-Platz 4
Frankfurt am Main, 60323
Germany

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of Bonn - Center for Development Research (ZEF) ( email )

Walter-Flex-Str. 3
Bonn, NRW 53113
Germany

Mark Voorneveld (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden

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