Ambiguity and Social Interaction

We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. Optimistic and pessimistic responses to ambiguity are formally modelled. We show that pessimism has the effect of increasing (decreasing) equilibrium prices under Cournot (Bertrand) competition. In addition the effects of ambiguity on peace-making are examined. It is shown that ambiguity may select equilibria in coordination games with multiple equilibria. Some comparative statics results are derived for the impact of ambiguity in games with strategic complements.

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Year of publication:	2007
Authors:	Eichberger, Jürgen ; Kelsey, David ; Schipper, Burkhard C.
Publisher:	Heidelberg : University of Heidelberg, Department of Economics
Subject:	Erwartungsnutzen \| Oligopol \| Friedenssicherung \| Theorie \| Entscheidung unter Unsicherheit \| Soziale Beziehungen \| Nichtkooperatives Spiel \| Ambiguity \| Optimism \| Pessimism \| Strategic Games \| Oligopoly \| Strategic Delegation \| Peace-making \| Strategic Complements \| Choquet Expected Utility

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Series:	Discussion Paper Series ; 443
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	553814699 [GVK] hdl:10419/127265 [Handle] RePEc:awi:wpaper:0443 [RePEc]
Classification:	C72 - Noncooperative Games ; D43 - Oligopoly and Other Forms of Market Imperfection ; D62 - Externalities ; D81 - Criteria for Decision-Making under Risk and Uncertainty
Source:	EconStor

Persistent link: https://www.econbiz.de/10011422157