Date of Degree
PhD (Doctor of Philosophy)
This thesis is composed of three chapters. Chapter 1 considers the existence of equilibria in games with complete information, where players may have non-ordered and discontinuous preferences. Chapter 2 studies the issues on the existence of pure and behavioral strategy equilibria in games with incomplete information and discontinuous payoffs. We consider the standard setting with Bayesian preferences as well as the case in which players may face ambiguity. Chapter 3 extends the classical results on the Walras-core existence and equivalence to an ambiguous asymmetric information economy, where agents maximize maximin expected utilities (MEU). These results are based on the papers He and Yannelis (2014, 2015a,b,c, 2016a,b).
In the first chapter, we propose the condition of "continuous inclusion property" to handle the difficulty of discontinuous payoffs in various general equilibrium and game theory models. Such discontinuities arise naturally in economic situations, including auction, price competition of firms and also patent races. Based on the continuous inclusion property, we establish the equilibrium existence result in a very general framework with discontinuous payoffs. On one hand, this condition is sufficiently general from the methodological point of view, as it unifies almost all special conditions proposed in the literature. On the other hand, our condition is also potentially useful from the realistic point of view, as it could be applied to deal with many economic models which cannot be studied before because of the presence of the discontinuity.
In the second chapter, I study the existence problem of pure and behavioral strategy equilibria in discontinuous games with incomplete information. The framework of games with incomplete information is standard as in the literature, except for that we allow players' payoffs to be discontinuous. We illustrate by examples that the Bayesian equilibria may not exist in such games and the previous results are not applicable to handle this problem. We propose some general conditions to retain the existence of both pure strategy and behavioral strategy Bayesian equilibrium, and show that our condition is tight. In addition, we study the equilibrium existence problem in discontinuous games under incomplete information and ambiguity, and show that the maximin framework solves the equilibrium existence issue without introducing any additional condition.
In the last chapter, I study a general equilibrium model with incomplete information by adopting the maximin expected utilities. The model is powerful enough to describe the behaviors of risk averse agents that cannot be explained by the standard assumption of subjective expected utilities. I use this new formulation to extend many classical results in general equilibrium theory by incorporating ambiguity into the model. In addition, the desirable incentive compatibility property is shown in our model with maximin expected utilities, while this property will typically fail in the traditional setup. Specifically, the existence results are shown for various equilibrium notions in a general equilibrium model, and the incentives can be guaranteed when all agents use the maximin expected utilities.
This thesis contributes to economic theory on economies and games with discontinuous payoffs and ambiguity. In Chapter 1, we consider economic environments with complete information, where agents' payoffs may exhibit discontinuities. To handle this difficulty, we propose the condition of “continuous inclusion property", and prove the existence of equilibria in a very general framework. Chapter 2 addresses the issues on the existence of pure and behavioral strategy equilibria in games with incomplete information and discontinuous payoffs. We provide several examples to show that a Bayesian equilibrium may not exist and previous results are not directly applicable. We introduce some general conditions to retain the existence of both pure strategy and behavioral strategy Bayesian equilibria, and apply our results to analyze all-pay auctions with general tie-breaking rules. Chapter 3 studies a general equilibrium model with incomplete information and ambiguity aversion. We assume that agents adopt the maximin preferences, and show the existence of maximin expectations equilibrium and maximin core. Importantly, we prove that the desirable incentive compatibility property can be guaranteed for efficient allocations, which typically fails in the conventional approach.
publicabstract, Ambiguity, Game Theory, General Equilibrium Theory, Incomplete Information
Copyright 2016 Wei He