Abstract
In this paper, the robust game model proposed by Aghassi and Bertsimas (Math Program Ser B 107:231–273, 2006) for matrix games is extended to games with a broader class of payoff functions. This is a distribution-free model of incomplete information for finite games where players adopt a robust-optimization approach to contend with payoff uncertainty. They are called robust players and seek the maximum guaranteed payoff given the strategy of the others. Consistently with this decision criterion, a set of strategies is an equilibrium, robust-optimization equilibrium, if each player’s strategy is a best response to the other player’s strategies, under the worst-case scenarios. The aim of the paper is twofold. In the first part, we provide robust-optimization equilibrium’s existence result for a quite general class of games and we prove that it exists a suitable value ϵ such that robust-optimization equilibria are a subset of ϵ-Nash equilibria of the nominal version, i.e., without uncertainty, of the robust game. This provides a theoretical motivation for the robust approach, as it provides new insight and a rational agent motivation for ϵ-Nash equilibrium. In the last part, we propose an application of the theory to a classical Cournot duopoly model which shows significant differences between the robust game and its nominal version.