Robust Robustness
Abstract
The maxmin approach to distributional robustness evaluates each mechanism according to its payoff guarantee over all priors in an ambiguity set. We propose a refinement: the guarantee must be approximately satisfied at priors near the ambiguity set (in the weak topology). We call such a guarantee robust. The payoff guarantees from some maxmin-optimal mechanisms in the literature are not robust. We show, however, that over certain standard ambiguity sets (such as continuous moment sets), every mechanism's payoff guarantee is robust. We give a behavioral characterization of our refined robustness notion by imposing a new continuity axiom on maxmin preferences.
- Publication:
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arXiv e-prints
- Pub Date:
- August 2024
- DOI:
- 10.48550/arXiv.2408.16898
- arXiv:
- arXiv:2408.16898
- Bibcode:
- 2024arXiv240816898B
- Keywords:
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- Economics - Theoretical Economics