Abstract
This paper argues that Nash equilibrium is a solution where all strategic uncertainty has been resolved and, therefore, inappropriate to model situations that involve “ambiguity.” Instead, to capture what players will do in the presence of some strategic uncertainty, takes a solution concept that is closed under best replies. It is shown that such a solution concept, fixed sets under the best reply correspondence, exists for a class of games significantly wider than those games for which generalizations of Nash equilibrium exist. In particular, this solution can do without the expected utility hypothesis.
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Jungbauer, T., Ritzberger, K. Strategic games beyond expected utility. Econ Theory 48, 377–398 (2011). https://doi.org/10.1007/s00199-011-0638-2
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DOI: https://doi.org/10.1007/s00199-011-0638-2