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Equilibrium in Beliefs Under Uncertainty

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  • Kin Chung Lo

Abstract

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 experimental findings such as the Ellsberg Paradox demonstrating that the beliefs of a decision maker may not be representable by a probability measure, this paper generalizes equilibrium concepts for normal form games to allow for the beliefs of each player to be representable by a closed and convex set of probability measures. The implications of this generalization for the strategy choices and welfare of players are studied.

Suggested Citation

  • Kin Chung Lo, 1995. "Equilibrium in Beliefs Under Uncertainty," Working Papers ecpap-95-02, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:ecpap-95-02
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    References listed on IDEAS

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    More about this item

    Keywords

    uncertainty; Ellsberg Paradox; multiple priors; Nash Equilibrium; equilibrium in beliefs;
    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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