Template-Type: ReDIF-Paper 1.0
Author-Name: Burkhard C. Schipper
Author-Name-First: Burkhard C.
Author-Name-Last: Schipper
Author-Name: David Kelsey
Author-Name-First: David
Author-Name-Last: Kelsey
Author-Workplace-Name: Department of Economics, University of California Davis
Title: Ambiguity and Social Interaction
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.
Length: 33
File-URL: https://repec.dss.ucdavis.edu/files/f1X6JHDDkQVzYR6pKwY7x8ou/05-36.pdf
File-Format: application/pdf
Number: 56
Classification-JEL: C72, D43, D62, D81
KeyWords: Ambiguity, Optimism, Pessimism, Strategic Games, Oligopoly, Strategic Delegation,Peace-making, Strategic Complements, Choquet Expected Utility
Creation-Date: 20051113
Handle: RePEc:cda:wpaper:56