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Optimism and Pessimism in Strategic Interactions under Ignorance

Author

Listed:
  • Gabriel Ziegler

    (School of Economics, University of Edinburgh)

  • Pierfrancesco Guarino

    (University of Udine)

Abstract

We study players interacting under the veil of ignorance, who have—coarse—beliefs represented as subsets of opponents' actions. We analyze when these players follow max min or max max decision criteria, which we identify with pessimistic or optimistic attitudes, respectively. Explicitly formalizing these attitudes and how players reason interactively under ignorance, we characterize the behavioral implications related to common belief in these events: while optimism is related to Point Rationalizability, a new algorithm -- Wald Rationalizability -- captures pessimism. Our characterizations allow us to uncover novel results: (i) regarding optimism, we relate it to wishful thinking a la Yildiz (2007) and we prove that dropping the (implicit) "belief-implies-truth" assumption reverses an existence failure described therein; (ii) we shed light on the notion of rationality in ordinal games; (iii) we clarify the conceptual underpinnings behind a discontinuity in Rationalizability hinted in the analysis of Weinstein (2016).

Suggested Citation

  • Gabriel Ziegler & Pierfrancesco Guarino, 2022. "Optimism and Pessimism in Strategic Interactions under Ignorance," Edinburgh School of Economics Discussion Paper Series 309, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:309
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    File URL: http://www.econ.ed.ac.uk/papers/id309_esedps.pdf
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    References listed on IDEAS

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    1. Brunner, Christoph & Kauffeldt, T. Florian & Rau, Hannes, 2021. "Does mutual knowledge of preferences lead to more Nash equilibrium play? Experimental evidence," European Economic Review, Elsevier, vol. 135(C).
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    More about this item

    Keywords

    Ignorance; Optimism/Pessimism; Point/Wald Rationalizability; Interactive Epistemology; Wishful Thinking; Boergers Dominance.;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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