Optimism and Pessimism in Games
AbstractThis paper considers the impact of ambiguity in strategic situations. It extends the earlier literature by allowing for optimistic responses to ambiguity. Ambiguity is modelled by CEU preferences. We study comparative statics of changes in ambiguity-attitude in games with strategic complements or substitutes. This gives a precise statement of the impact of ambiguity on economic behaviour. We also the possibility that players may be overconfident in the sense of over-estimating the probability of favourable outcomes. This has a similar effect of increasing equilibrium strategies in games of strategic complements, Finally we consider RDEU preferences.
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Bibliographic InfoPaper provided by Exeter University, Department of Economics in its series Discussion Papers with number 0605.
Date of creation: 2006
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Ambiguity in games; overcon?fidence; strategic complementarity; optimism; RDEU.;
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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- Jürgen Eichberger & David Kelsey, 2008.
"Are the Treasures of Game Theory Ambiguous?,"
0469, University of Heidelberg, Department of Economics, revised Jul 2008.
- Daniel Laskar, 2013. "Ambiguity, Pessimism, Optimism and Financial Crises in a Simple Global Game Model," PSE Working Papers hal-00811923, HAL.
- Diamantaras, Dimitrios & Gilles, Robert P., 2011.
"Ambiguity, social opinion and the use of common property resources,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 80(1), pages 210-222.
- Dimitrios Diamantaras & Robert P. Gilles, 2010. "Ambiguity, Social Opinion and the Use of Common Property Resources," DETU Working Papers 1006, Department of Economics, Temple University.
- Thomas Jungbauer & Klaus Ritzberger, 2011. "Strategic games beyond expected utility," Economic Theory, Springer, vol. 48(2), pages 377-398, October.
- Daniel Laskar, 2013. "Ambiguity, Pessimism, Optimism and Financial Crises in a Simple Global Game Model," Working Papers hal-00811923, HAL.
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