Ambiguity and Social Interaction

Eichberger, Jürgen, Kelsey, David and Schipper, Burkhard C. (July 2005): Ambiguity and Social Interaction. SFB/TR 15 Discussion Paper No. 59

Abstract

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.

• Item Type: Paper
• Keywords: Ambiguity, Optimism, Pessimism, Strategic Games, Oligopoly, Strategic Delegation, Peace-making, Strategic Complements, Choquet Expected Utility
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C4 - Experimentelle Analyse von rationalen und beschränkt rationalen Theorien des Marktverhaltens
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: C72, D43, D62, D81
• Language: English