Abstract
We study strategic games in which each player lacks perfect understanding of opponents’ information structures, and as a result, does not know precisely the probability distribution governing opponents’ action choices. The Ellsberg Paradox demonstrates that when people act on unknown probabilities, their behavior may be inconsistent with the expected utility model. Motivated by the Ellsberg Paradox and related experimental findings, we assume that players’ preferences conform to the Choquet expected utility model of Schmeidler [Econometrica 57 (1989) 571] and the multiple priors model of Gilboa and Schmeidler [Journal of Mathematical Economics 18 (1989) 141]. A generalization of correlated equilibrium is proposed.
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