NASH EQUILIBRIUM WITH LOWER PROBABILITIES

We generalize the concept of Nash equilibrium in mixed strategies for strategic form games to allow for ambiguity in the players' expectatio ns. In contrast to other contributions, we model ambiguity by means of so-called lower probability measures or belief functions, which makes it possible to distinguish between a player's assessment of ambiguity and his attitude towards ambiguity. We also generalize the concept of trembling hand perfect equilibrium. Finally, we demonstrate that for certain attitudes towards ambiguity it is possible to explain cooperat ion in the one-shot Prisoner's Dilemma in a way that is in accordance with some recent experimental findings.