Incomplete Information Games with Multiple Priors

Atsushi Kajii and Takashi Ui

No 583, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: We present a model of incomplete information games with sets of priors. Upon arrival of private information, each player "updates" by the Bayes rule each of priors in this set to construct the set of posteriors consistent with the arrived piece of information. Then the player uses a possibly proper subset of this set of posteriors to form beliefs about the opponents' strategic choices. And finally the player evaluates his actions by the most pessimistic posterior beliefs `a la Gilboa and Schmeidler (1989). So each player's preferences may exhibit non-linearity in probabilities which can be interpreted as the player's aversion to ambiguity or uncertainty. In this setup, we define a couple of equilibrium concepts, establish existence results for them, and demonstrate by examples how players' views on uncertainty about the environment affect the strategic outcomes.

Keywords: incomplete information games; multiple priors; ambiguity aversion; uncertainty aversion (search for similar items in EconPapers)
JEL-codes: C72 D81 D82 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2004-05
New Economics Papers: this item is included in nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: INCOMPLETE INFORMATION GAMES WITH MULTIPLE PRIORS* (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:583

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