Template-type: ReDif-Paper 1.0
Author-Name: Ismail M.S. 
Author-workplace-name: GSBE
Title: Maximin equilibrium
Abstract: We introduce a new concept which extends von Neumann and Morgensterns maximin strategy solution by incorporating individual rationality of the players. Maximin equilibrium, extending Nashs value approach, is based on the evaluation of the strategic uncertainty of the whole game. We show that maximin equilibrium is invariant under strictly increasing transformations of the payoffs. Notably, every finite game possesses a maximin equilibrium in pure strategies. Considering the games in von Neumann-Morgenstern mixed extension, we demonstrate that the maximin equilibrium value is precisely the maximin minimax value and it coincides with the maximin strategies in twoperson zerosum games. We also show that for every Nash equilibrium that is not a maximin equilibrium there exists a maximin equilibrium that Pareto dominates it. Hence, a strong Nash equilibrium is always a maximin equilibrium. In addition, a maximin equilibrium is never Pareto dominated by a Nash equilibrium. Finally, we discuss maximin equilibrium predictions in several games including the travelers dilemma.
Keywords: Noncooperative Games; 
Classification-JEL: C72; .
Series:  research memorandum
Creation-Date: 2014
Number: 037
File-URL: http://pub.maastrichtuniversity.nl/13170099-ecad-4a5d-9693-21bc343dece0
File-Format: application/pdf
File-Size: 504227
Handle: RePEc:unm:umagsb:2014037