Ambiguity and social interaction

Jürgen Eichberger, David Kelsey and Burkhard Schipper ()

Oxford Economic Papers, 2009, vol. 61, issue 2, pages 355-379

Abstract: A decision-maker is said to have an ambiguous belief if it is not precise enough to be represented by a single probability distribution. The pervasive assumption in game theoretic models in economics is that players' beliefs are unambiguous. This paper argues, drawing on examples from economics and politics, that it may be illuminating, in instances, to model players as having ambiguous beliefs. 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. Copyright 2009 , Oxford University Press.

Date: 2009
View citations in EconPapers

Downloads: (external link)
http://hdl.handle.net/10.1093/oep/gpn030 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Ambiguity and Social Interaction (2005)
Working Paper: Ambiguity and Social Interaction (2007)
Working Paper: Ambiguity and Social Interaction (2007)
Working Paper: Ambiguity and Social Interaction (2003)
Working Paper: Ambiguity and Social Interaction (2003)
Working Paper: Ambiguity and Social Interaction (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:oup:oxecpp:v:61:y:2009:i:2:p:355-379

Ordering information: This journal article can be ordered from
http://www.oup.co.uk/journals

Access Statistics for this article

Oxford Economic Papers is edited by A. Banerjee and James Forder

More articles in Oxford Economic Papers from Oxford University Press
Address: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Series data maintained by Christopher F. Baum ().