Nash Equilibrium with Lower Probabilities
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We generalize the concept of Nash equilibrium in mixed strategies for strategic form games to allow for ambiguity in the players' expectations. In contrast to other contributions, we model ambiguity by means of so-called lower probability measures or belief functions, which makes it possible to distinguish between a player's assessment of ambiguity and his attitude towards ambiguity. We also generalize the concept of trembling hand perfect equilibrium. Finally, we demonstrate that for certain attitudes towards ambiguity it is possible to explain cooperation in the one-shot Prisoner's Dilemma in a way that is in accordance with some recent experimental findings.
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- Nash Equilibrium with Lower Probabilities
Theory and Decision
Volume 44, Issue 1 , pp 37-66
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- Knightian uncertainty
- mixed strategy Nash equilibrium
- lower probabilities
- belief functions
- prisoner's dilemma
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