Uncertainty Aversion and Equilibrium in Normal Form Games

This paper presents an analysis of games in which rationality is not necessarily mutual knowledge. We argue that a player who faces a non-rational opponent faces genuine uncertainty that is best captured by non-additive beliefs. Optimal strategies can then be derived from assumptions about the rational player's attitude towards uncertainty. This paper investigates the consequences of this view of strategic interaction. We present an equilibrium concept for normal form games, called Choquet–Nash Equilibrium, that formalizes this intuition, and study existence and properties of these equilibria. Our results suggest new robustness concepts for Nash equilibria.