CYBEX Information Sharing Game with Objective and Subjective Players

Abstract

We model an information sharing game among firms as an evolutionary game on a graph under the condition that players perception of uncertainty and decision making can follow either an objective expected utility theory (EUT) model or a subjective prospect theory (PT) model. Each player chooses one of two strategies with probabilities $x$ and $1-x$ , where the subjective players bias their choices of the probabilities to be $w(x)$ and $w(1-x)$ to reflect the probability weighting effect of PT. We find that players' behavior is affected by the total number of players and the number of each type of player (objective or subjective). We show that increasing the number of participating firms encourages the information sharing strategy and the behavior becomes similar for both types of players. Subjective players' are affected more by increasing the number of participating firms (the number of players). As a result, subjective players are more likely to cooperate by sharing information and paying the costs of this sharing than objective players. We derive the conditions to achieve a locally asymptotically stable Nash equilibrium (NE) and the necessary conditions to achieve an evolutionary stable strategy (ESS).