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Ambiguity and Social Interaction


Jürgen Eichberger


University of Heidelberg - Alfred Weber Institute for Economics

David Kelsey


University of Exeter Business School - Department of Economics

Burkhard C. Schipper


University of California, Davis - Department of Economics
March 30, 2007


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.

Number of Pages in PDF File: 34

Keywords: Ambiguity, Optimism, Pessimism, Oligopoly, Strategic Delegation, Peace-making, Choquet expected utility

JEL Classification: C72, D43, D62, D81

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Date posted: December 1, 2003  

Suggested Citation

Eichberger, Jürgen, Kelsey, David and Schipper, Burkhard C., Ambiguity and Social Interaction (March 30, 2007). Available at SSRN: http://ssrn.com/abstract=464242 or http://dx.doi.org/10.2139/ssrn.464242

Contact Information

Jürgen Eichberger
University of Heidelberg - Alfred Weber Institute for Economics ( email )
Heidelberg, D-69117
Germany
David Kelsey
University of Exeter Business School - Department of Economics ( email )
Streatham Court
Exeter, Devon EX4 4PU
United Kingdom
013 9226 2536 (Phone)
HOME PAGE: http://people.exeter.ac.uk/dk210/
Burkhard C. Schipper (Contact Author)
University of California, Davis - Department of Economics ( email )
One Shields Drive
Davis, CA 95616-8578
United States
530-752-6142 (Phone)
530-752-9382 (Fax)
HOME PAGE: http://www.econ.ucdavis.edu/faculty/schipper/
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