Games with randomly disturbed payoffs: A new rationale for mixed-strategy equilibrium points

Abstract

Equilibrium points in mixed strategies seem to be unstable, because any player can deviate without penalty from his equilibrium strategy even if he expects all other players to stick to theirs. This paper proposes a model under which most mixed-strategy equilibrium points have full stability. It is argued that for any game Γ the players' uncertainty about the other players' exact payoffs can be modeled as a disturbed game Γ*, i.e., as a game with small random fluctuations in the payoffs. Any equilibrium point in Γ, whether it is in pure or in mixed strategies, can "almost always" be obtained as a limit of a pure-strategy equilibrium point in the corresponding disturbed game Γ* when all disturbances go to zero. Accordingly, mixed-strategy equilibrium points are stable - even though the players may make no deliberate effort to use their pure strategies with the probability weights prescribed by their mixed equilibrium strategies - because the random fluctuations in their payoffs will make them use their pure strategies approximately with the prescribed probabilities. © 1973 Physica-Verlag Rudolf Liebing KG.