Optimism and Pessimism in Strategic Interactions under Ignorance

Gabriel Ziegler and Pierfrancesco Guarino
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Pierfrancesco Guarino: University of Udine

No 309, Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

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).

Keywords: Ignorance; Optimism/Pessimism; Point/Wald Rationalizability; Interactive Epistemology; Wishful Thinking; Boergers Dominance. (search for similar items in EconPapers)
JEL-codes: C63 C72 D01 D81 D83 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2022-11
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Published in Games and Economic Behavior, Volume 136, November 2022, Pages 559-585

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