Rindone, Fabio and Greco, Salvatore and Di Gaetano, Luigi
(2013):
*On prospects and games: an equilibrium analysis under prospect theory.*

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## Abstract

The aim of this paper is to introduce prospect theory in a game theoretic framework. We address the complexity of the weighting function by restricting the object of our analysis to a 2-player 2-strategy game, in order to derive some core results. We find that dominant and indifferent strategies are preserved under prospect theory. However, in absence of dominant strategies, equilibrium may not exist depending on parameters. We also discuss a different approach presented by Metzger and Rieger (2009) and give some interesting interpretations of the two approaches.

Item Type: | MPRA Paper |
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Original Title: | On prospects and games: an equilibrium analysis under prospect theory |

English Title: | On prospects and games: an equilibrium analysis under prospect theory |

Language: | English |

Keywords: | Game theory, Prospect theory, Nash equilibrium, Behavioural economics. |

Subjects: | C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles |

Item ID: | 52131 |

Depositing User: | Fabio Rindone |

Date Deposited: | 11 Dec 2013 09:20 |

Last Modified: | 28 Sep 2019 21:32 |

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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/52131 |