Nash equilibrium without mutual knowledge of rationality

In a Nash equilibrium, players' rationality is mutual knowledge. However, b oth intuition and experimental evidence suggest that players do not know fo r sure the rationality of opponents. This paper proposes a nerv equilibrium concept, cautious equilibrium, that generalizes Nash equilibrium in terms of preferences in two person strategic games, In a cautious equilibrium; pl ayers do not necessarily know the rationality of opponents, but they view r ationality as infinitely more likely than irrationality. For suitable model s of preference, cautious equilibrium predicts that a player might take a " cautious" strategy that is not a best response in any Nash equilibrium.