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Purification and disambiguation of Ellsberg equilibria

Author

Listed:
  • Benoit Decerf

    (University of Namur)

  • Frank Riedel

    (Bielefeld University
    University of Johannesburg)

Abstract

Recently, the use of Knightian (uncertain) strategies in normal form games has received increasing attention. The use of uncertain acts in games leads to new (Ellsberg) equilibria. We provide a foundation of the new equilibrium concept in the spirit of Harsanyi by proving an extension of the Purification Theorem for $$2\times 2$$2×2 normal form games. Our result implies that Ellsberg equilibria are limits of equilibria in slightly perturbed games with private information. In such equilibria, players use pure or maxmin strategies only.

Suggested Citation

  • Benoit Decerf & Frank Riedel, 2020. "Purification and disambiguation of Ellsberg equilibria," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(3), pages 595-636, April.
    • Handle: RePEc:spr:joecth:v:69:y:2020:i:3:d:10.1007_s00199-019-01186-8
    DOI: 10.1007/s00199-019-01186-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Knightian uncertainty; Ellsberg games; Ambiguity aversion; Purification; Disambiguation;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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