MIXED-STRATEGY NASH EQUILIBRIUM BASED UPON EXPECTED UTILITY AND QUADRATIC UTILITY

The notion of a mixed-strategy Nash equilibrium suffers from three inh erent difficulties. First, given the equilibrium strategies of other p layers, there are many best replies. Second, the equilibrium is unstab le. Third, comparative statics results are counterintuitive. We demons trate that these difficulties an have their origin in von Neumann and Morgenstern's expected utility. In contrast, players with ''quadratic utility'' have unique best replies and the Nash equilibrium appears to yield intuitive comparative statics results. Journal of Economic Lite rature Classification Number: C72. (C) 1995 Academic Press, Inc.