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Sequential Two-Player Games With Ambiguity

  • Jürgen Eichberger
  • David Kelsey

If players' beliefs are strictly nonadditive, the Dempster-Shafer updating rule can be used to define beliefs off the equilibrium path. We define an equilibrium concept in sequential two-person games where players update their beliefs with the Dempster-Shafer updating rule. We show that in the limit as uncertainty tends to zero, our equilibrium approximates Bayesian Nash equilibrium. We argue that our equilibrium can be used to define a refinement of Bayesian Nash equilibrium by imposing context-dependent constraints on beliefs under uncertainty. Copyright 2004 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 45 (2004)
Issue (Month): 4 (November)
Pages: 1229-1261

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Handle: RePEc:ier:iecrev:v:45:y:2004:i:4:p:1229-1261
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