Extensive Form Games with Uncertainty Averse Players

Nash equilibrium presumes that the beliefs of a player are represented by a probability measure. Motivated by the Ellsberg Paradox and relevant experimental findings demonstrating that this representation of beliefs may be unrealistic, this paper generalizes Nash equilibrium in finite extensive form games to allow for preferences conforming to the multiple priors model developed by Gilboa and Schmeidler Journal of Mathematical Economics, 18 (1989), 141–153]. The implications of this generalization for strategy choices and welfare are studied. Journal of Economic Literature Classification Numbers: C72, D81.