Abstract:

Two results concerning the relation between rationality and equilibrium concepts in normal form games are generalized for the case where players do not satisfy the reduction of compound lotteries axiom. The crucial axiom of expected utility theory is the independence axiom which itself is a combination of two axioms: the compound independence axiom and the reduction of compound lotteries axiom. This paper is an effort to extend game theory to non-expected utility preferences. It generalizes the results of Aumann (1987) and Aumann and Brandenburger (1991) to games with players who do not satisfy the reduction of compound lotteries axiom. We show that the results of the above authors do not depend on the specific definition of rationality applied by them.

Website