MIXED EQUILIBRIUM IN 2 × 2 NORMAL FORM GAMES: WHEN BURNING MONEY IS RATIONAL

ABSTRACT We discuss the rationality of burning money behavior from a new perspective: the mixed Nash equilibrium in 2 × 2 normal form games. We support our argument analyzing the first-order derivatives of the players' mixed equilibrium expected utility payoffs with respect to their own utility payoffs. We establish necessary and sufficient conditions that guarantee the existence of negative derivatives. In particular, games with negative derivatives are the ones that create incentives for burning money behavior since such behavior in these games improves the player's mixed equilibrium expect...