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Extensive Form Games with Uncertainty Averse Players

  • Lo, Kin Chung

Existing equilibrium concepts for games make use of the subjective expected utility model axiomatized by Savage (1954) to represent players' preferences. Accordingly, each player's beliefs about the strategies played by opponents are represented by a probability measure. Motivated by the Ellsberg Paradox and relevant experimental findings demonstrating that the beliefs of a decision maker may not be representable by a probability measure, this paper generalizes Nash Equilibrium in finite extensive form games to allow for preferences conforming to the multiple priors model developed in Gilboa and Schmeidler (1989). The implications of this generalization for strategy choices and welfare are studied.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 28 (1999)
Issue (Month): 2 (August)
Pages: 256-270

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Handle: RePEc:eee:gamebe:v:28:y:1999:i:2:p:256-270
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May.
  2. KOHLBERG, Elon & MERTENS, Jean-François, . "On the strategic stability of equilibria," CORE Discussion Papers RP -716, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  4. Epstein Larry G. & Le Breton Michel, 1993. "Dynamically Consistent Beliefs Must Be Bayesian," Journal of Economic Theory, Elsevier, vol. 61(1), pages 1-22, October.
  5. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, June.
  6. Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
  7. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
  8. Karni, E. & Safra, Z., 1988. "Ascending Bid Auctions With Behaviorally Consistent Bidders," Papers 1-88, Tel Aviv.
  9. Mark J. Machina & David Schmeidler, 1990. "A More Robust Definition of Subjective Probability," Discussion Paper Serie A 306, University of Bonn, Germany.
  10. Camerer, Colin & Weber, Martin, 1992. " Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-70, October.
  11. Kin Chung Lo, 1999. "Nash equilibrium without mutual knowledge of rationality," Economic Theory, Springer, vol. 14(3), pages 621-633.
  12. F J Anscombe & R J Aumann, 2000. "A Definition of Subjective Probability," Levine's Working Paper Archive 7591, David K. Levine.
  13. Gilboa Itzhak & Schmeidler David, 1993. "Updating Ambiguous Beliefs," Journal of Economic Theory, Elsevier, vol. 59(1), pages 33-49, February.
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