Murdoch University Research Repository

Welcome to the Murdoch University Research Repository

The Murdoch University Research Repository is an open access digital collection of research
created by Murdoch University staff, researchers and postgraduate students.

Learn more

Behavior in the centipede game: A decision-theoretical perspective

Blavatskyy, P. (2015) Behavior in the centipede game: A decision-theoretical perspective. Economics Letters, 133 (August). pp. 117-122.

[img]
Preview
PDF - Authors' Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (586kB)
Link to Published Version: http://dx.doi.org/10.1016/j.econlet.2015.05.031
*Subscription may be required

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.

Item Type: Journal Article
Murdoch Affiliation: School of Management and Governance
Publisher: Elsevier
Copyright: Elsevier
URI: http://researchrepository.murdoch.edu.au/id/eprint/27128
Item Control Page Item Control Page

Downloads

Downloads per month over past year