Abstract: In this paper, we present a model of finitely repeated games in which players can strategically make use of objective ambiguity. In each round of a finite repetition of a finite stage-game, in addition to the classic pure and mixed actions, players can employ objectively ambiguous actions by using imprecise probabilistic devices as Ellsberg urns to conceal their intentions. We follow Riedel and Saas (2014) and we call a Nash equilibrium of this extended stage-game an Ellsberg equilibrium. The main finding is that, when each player has many continuation payoffs in Ellsberg actions, any feasible payoff vector of the original stage-game that dominates the mixed strategy maxmin payoff vector of the original stage-game is (ex-ante and ex-post) approachable by means of subgame perfect Ellsberg equilibrium strategies of the finitely repeated game with discounting. Our condition is also necessary.
Key words: Objective Ambiguity, Ambiguity Aversion, Finitely Repeated Games, Subgame Perfect Equilibrium, Ellsberg Urns, Ellsberg Strategies
JEL classi cation: C72, C73, D81