Psychological Nash equilibria under ambiguity

• Published in: Mathematical social sciences 2022-11, Vol.120, p.92-106
• Main Authors: De Marco, Giuseppe, Romaniello, Maria, Roviello, Alba
• Format: Article
• Language: English
• Subjects: Ambiguity; Ambiguous beliefs; Beliefs; Convergence; Equilibrium; Equilibrium existence; Equilibrium selection; Game theory; Games; Psychological games; Sequences; Utility functions
• ISSN: 0165-4896; 1879-3118
• DOI: 10.1016/j.mathsocsci.2022.09.005

Psychological games aim to represent situations in which players may have belief-dependent motivations. In this setting, utility functions are directly dependent on the entire hierarchy of beliefs of each player. On the other hand, the literature on strategic ambiguity in classical games highlights that players may have ambiguous (or imprecise) beliefs about opponents’ strategy choices. In this paper, we look at the issue of ambiguity in the framework of simultaneous psychological games by taking into account ambiguous hierarchies of beliefs and study a natural generalization of the psychological Nash equilibrium concept to this framework. We give an existence result for this new concept of equilibrium and provide examples that show that even an infinitesimal amount of ambiguity may alter significantly the equilibria of the game or can work as an equilibrium selection device. Finally, we look at the problem of stability of psychological equilibria with respect to ambiguous trembles on the entire hierarchy of correct beliefs and we provide a limit result that gives conditions so that sequences of psychological equilibria under ambiguous perturbation converge to psychological equilibria of the unperturbed game. •The present paper aims to jointly take into account two issues that arise from different strands of literature: Players’ preferences might depend on the entire hierarchy of beliefs; Beliefs might be ambiguous (or imprecise) in equilibrium.•We study a natural generalization of the psychological Nash equilibrium concept in simultaneous psychological games allowing for ambiguous hierarchies of beliefs.•We give an existence result for this new concept of equilibrium and provide examples that show many different effects of ambiguity.•In the examples, we show that an infinitesimal amount of ambiguity can work as an equilibrium selection device.•We provide a limit result that gives conditions so that sequences of psychological equilibria under ambiguous perturbation converge to psychological equilibria of the unperturbed psychological game.