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Correlated Nash equilibrium

  • Lo, Kin Chung

We modify the epistemic conditions for Nash equilibrium only to accommodate Gilboa and Schmeidler's [I. Gilboa, D. Schmeidler, Maxmin expected utility with nonunique prior, J. Math. Econ. 18 (1989) 141-153] maxmin expected utility preferences, and identify the equilibrium concept in n-player strategic games that characterizes the modified epistemic conditions. The epistemic characterization supports the equilibrium concept as a minimal generalization of Nash equilibrium, in the sense that it deviates from Nash equilibrium only in terms of players' attitude towards ambiguity. Consequently, comparing it with Nash equilibrium constitutes a ceteris paribus study of the effects of ambiguity on how a game is played. For example, with ambiguity, (beliefs about) action choices are in general correlated.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 2 (March)
Pages: 722-743

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Handle: RePEc:eee:jetheo:v:144:y:2009:i:2:p:722-743
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