Equilibrium without Independence *

Because players whose preferences violate the von Neumann-Morgenstern independence axiom may be unwilling to randomize as mixed-strategy Nash equilibrium would require, a Nash equilibrium may not exist without independence. This paper generalizes Nash’s definition of equilibrium, retaining its rationalexpectations spirit but relaxing its requirement that a player must bear as much uncertainty about his own strategy choice as other players do. The resulting notion, “equilibrium in beliefs,” is equivalent to Nash equilibrium when independence is satistied, but exists without independence. This makes it possible to study the robustness of equilibrium comparative statics results to violations of independence. Jotuna/ of’ Gononric, Lirerarurr Classification Numbers: 022, 026. ” 1990 Academic