Partially-Specified Probabilities: Decisions and Games

Abstract

In Ellsberg paradox, decision makers that are partially informed about the actual probability distribution violate the expected utility paradigm. This paper develops a theory of decision making with a partially specified probability. The paper takes an axiomatic approach using Anscombe-Aumann's (1963) setting, and is based on a concave integral for capacities (see Lehrer, 2005).

The partially-specified decision making is then carried on to games in order to introduce partially-specified equilibrium.

Keywords: Fat-free act, strongly fat-free act, partially-specified probability, decision making, partially-specified equilibrium, partially-specified correlated equilibrium

JEL Classification: C74, D81