Existence and dynamic consistency of Nash equilibrium with non-expected utility preferences

Eddie Dekel*, Zvi Safra, Uzi Segal

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

42 Scopus citations

Abstract

Sufficient conditions for the existence of a Nash equilibrium are given when preferences may violate the reduction of compound lotteries assumption (RCLA). Without RCLA decision makers may not be indifferent between compound lotteries which have the same probabilities of final outcomes. Therefore the conditions depend on how players perceive the game-whether they view themselves as moving first or second. We also review conditions under which the equilibria will be dynamically consistent.

Original languageEnglish (US)
Pages (from-to)229-246
Number of pages18
JournalJournal of Economic Theory
Volume55
Issue number2
DOIs
StatePublished - Dec 1991

Funding

* The authors thank Edi Karni, Ariel Rubinstein, David Schmeidler, and Menahem Yaari for helpful comments and the National Science Foundation and SSHRC for financial support. ’ A seminal reference is Machina [19]. For surveys of the literature, including empirical findings and generalizations of EU, see, for example, Macrimmon and Larson [24], Machina [2&22], and Fishburn [7].

ASJC Scopus subject areas

  • Economics and Econometrics

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