Souza, Filipe and Rêgo, Leandro (2012): Mixed Equilibrium: When Burning Money is Rational.

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Abstract
We discuss the rationality of burning money behavior from a new perspective: the mixed Nash equilibrium. We support our argument analyzing the firstorder derivatives of the mixed equilibrium expected utility of the players with respect to their own utility payoffs in a 2x2 normal form game. We establish necessary and sufficient conditions that guarantee the existence of negative derivatives. In particular, games with negative derivatives are the ones that create incentives for burning money behavior since such behavior in these games improves the player’s mixed equilibrium expected utility. We show that a negative derivative for the mixed equilibrium expected utility of a given player i occurs if, and only if, he has a strict preference for one of the strategies of the other player. Moreover, negative derivatives always occur when they are taken with respect to player i’s highest and lowest game utility payoffs.
Item Type:  MPRA Paper 

Original Title:  Mixed Equilibrium: When Burning Money is Rational 
Language:  English 
Keywords:  Mixed Nash Equilibrium; Burning Money; Collaborative Dominance; Security Dilemma 
Subjects:  C  Mathematical and Quantitative Methods > C7  Game Theory and Bargaining Theory 
Item ID:  43410 
Depositing User:  Filipe Souza 
Date Deposited:  24. Dec 2012 14:13 
Last Modified:  20. Feb 2015 17:29 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/43410 