A strategic product for belief functions
Games and Economic Behavior, 2019, vol. 116, issue C, 38-64
The term “belief function” is generally used to refer to a class of capacities that can be viewed as representing ambiguity averse preferences. This paper introduces a definition of equilibrium for normal-form games with ambiguous beliefs, where belief functions are used to describe strategic uncertainty. To capture independence of strategies and beliefs, a novel notion of a “strategic product integral” is introduced for belief functions, based on their Möbius transforms, and shown to be different from the Choquet integral of an appropriate product capacity. A characterization of the integral in terms of maxmin expected utility expressed relative to elements of the cores of the respective belief functions, is also presented. The resulting equilibrium notion relies on Möbius transforms to embed objectively chosen probabilistic mixed strategies into ambiguous beliefs of opponents about these strategies, while incorporating stronger consistency requirements than those imposed by previous definitions of equilibria under ambiguity.
Keywords: Belief functions; Product capacities; Equilibrium under ambiguity; Strategic uncertainty (search for similar items in EconPapers)
JEL-codes: C72 D81 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:116:y:2019:i:c:p:38-64
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