What do uncertainty-averse decision-makers believe?

Summary. This paper introduces the concept of firm belief, which is proposed as a new epistemic model for a wide class of preferences. In particular, firm beliefs are shown to have the following desirable properties: (i) they are derived from preferences according to a plausible rule of epistemic inference; (ii) they satisfy standard logical properties; and (iii) tractable representations of firm belief are available for all (suitably continuous) biseparable preferences 13, 14], including the Choquet expected utility 30] and maxmin expected utility 16] classes. We also use firm belief to construct a generalization of Nash equilibrium for (two-player) normal form games. Received: December 14, 1999; revised version: February 26, 2001