Ambiguity and Social Interaction

34 Pages Posted: 1 Dec 2003  

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

Multiple version iconThere are 2 versions of this paper

Date Written: 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.

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

JEL Classification: C72, D43, D62, D81

Suggested Citation

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

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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