Ambiguity and Deviations from Standard Game Theory

Incorporating ambiguity into decision-making analysis creates a more refined and more realistic picture of actual human behavior. In this paper ambiguity is incorporated in to strategic interactions, namely two games from Goeree and Holt (2001). Unfortunately, these games are somewhat abstract and that is why in this paper the futures market is also studied game theoretically with ambiguity. The analysis will make use of the notion of capacities and the Choquet integral. One thing that becomes very clear from the analysis is the fact that ambiguity definitely influences and shapes the behavior of decision makers in strategic interactions. It is also shown that with incorporating ambiguity, observed deviations from Nash equilibria predictions can be explained and new equilibria can be found. As an extra the effect of risk attitudes is examined as well.