Mixed strategies and preference for randomization in games with ambiguity averse agents

Abstract

We study the use of mixed strategies in games by ambiguity averse agents with a preference for randomization. Applying the decision theoretic model of Saito (2015) to games, we establish that the set of rationalizable strategies grows larger as preference for randomization weakens. An agent's preference for randomization is partially observable: given the behavior of an agent in a game, we can determine an upper bound on the strength of randomization preference for that agent. Notably, data in previous experiments on ambiguity aversion in games is not consistent with a maximal preference for randomization for approximately 30% of subjects.