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Ambiguity and Social Interaction

Author

Listed:
  • Jurgen Eichberger

    (Alfred Weber Institut, Universitat Heidelberg)

  • David Kelsey

    (Department of Economics, University of Exeter)

  • Burkhard C. Schipper

    (Department of Economics, University of Bonn)

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 e?ect of increasing (decreasing) equilibrium prices under Cournot (Bertrand) competition. In addition the e?ects 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.

Suggested Citation

  • Jurgen Eichberger & David Kelsey & Burkhard C. Schipper, 2005. "Ambiguity and Social Interaction," Discussion Papers 0504, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:0504
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    References listed on IDEAS

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    More about this item

    Keywords

    Ambiguity; Optimism; Oligopoly; Peace-making; Choquet expected utility;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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