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Cooperation with Strategy-Dependent Uncertainty Attitude

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  • Nicola Dimitri

Abstract

The paper shows that in a Prisoner’s Dilemma Knightian uncertainty, formalised by multiple priors, may entail cooperation at a generalised Nash Equilibrium. The main idea is that players may have an attitude towards uncertainty that depends upon their available strategies. In particular, if players anticipate to be sufficiently more optimistic when choosing to cooperate, than when defecting, then they may indeed cooperate. Though uncommon in economic modelling, choice-dependent uncertainty attitude formalises a behaviour which is well understood and widely accepted by cognitive psychologists, within the theory of Cognitive Dissonance.

Suggested Citation

  • Nicola Dimitri, 2005. "Cooperation with Strategy-Dependent Uncertainty Attitude," Department of Economics University of Siena 457, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:457
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    File URL: http://repec.deps.unisi.it/quaderni/457.pdf
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    References listed on IDEAS

    as
    1. Lo, Kin Chung, 1999. "Extensive Form Games with Uncertainty Averse Players," Games and Economic Behavior, Elsevier, vol. 28(2), pages 256-270, August.
    2. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
    3. Lo, Kin Chung, 1996. "Equilibrium in Beliefs under Uncertainty," Journal of Economic Theory, Elsevier, vol. 71(2), pages 443-484, November.
    4. Marinacci, Massimo, 2000. "Ambiguous Games," Games and Economic Behavior, Elsevier, vol. 31(2), pages 191-219, May.
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    More about this item

    Keywords

    Cooperation; Cognitive Dissonance; Equilibrium; Games; Uncertainty;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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