OPTIMISM AND PESSIMISM IN GAMES

Jürgen Eichberger and David Kelsey

International Economic Review, 2014, vol. 55, issue 2, 483-505

Abstract: This article considers the impact of ambiguity in strategic situations. It extends the existing literature on games with ambiguity‐averse players by allowing for optimistic responses to ambiguity. We use the CEU model of ambiguity with a class of capacities introduced by Jaffrray and Philippe (Mathematics of Operations Research 22 (1997), 165–85), which allows us to distinguish ambiguity from ambiguity‐attitude, and propose a new solution concept, equilibrium under ambiguity (EUA), for players who may be characterized by ambiguity‐preference. Applying EUA, we study comparative statics of changes in ambiguity‐attitude in games with strategic complements. This extends work in Eichberger and Kelsey (Journal of Economic Theory 106 (2002), 436–66) on the effects of increasing ambiguity if players are ambiguity averse.

Date: 2014
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Citations: View citations in EconPapers (18)

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https://doi.org/10.1111/iere.12058

Related works:
Working Paper: Optimism and Pessimism in Games (2009)
Working Paper: Optimism and Pessimism in Games (2006)
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