Uncertainty aversion and rationality in games of perfect information

This paper shows how uncertainty aversion can resolve ties in extensive gam es of perfect information, and thereby refine subgame-perfection in such ga mes. This is done by assuming that (a) players are rational with multi-prio r expected utility functions of Gilboa and Schmeidler (1989), (Journal of E conomic Theory 48, 221-237); and (b) a player's plan of the game correspond s to set-valued acts at each of his decision nodes, the so-called strategy system, in contrast to single-valued act as specified in the traditional no tion of strategy profile. The effects of pre-communication channels among p layers are studied, and are reflected in each of the three proposed solutio ns. Finally, existence of equilibria are established for each proposed solu tion concept as well as comparisons with other existing solutions. (C) 2000 Elsevier Science B.V. All rights reserved.