SEQUENTIAL TWO-PLAYER GAMES WITH AMBIGUITY

Jürgen Eichberger and David Kelsey

International Economic Review, 2004, vol. 45, issue 4, 1229-1261

Abstract: 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.

Date: 2004
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