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Ambiguity and Social Interaction

  • Jurgen Eichberger

    (Alfred Weber Institut, Universitat Heidelberg)

  • David Kelsey

    (Department of Economics, University of Exeter)

  • Burkhard C. Schipper

    (Department of Economics, University of Bonn)

We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. Optimistic and pessimistic responses to ambiguity are formally modelled. We show that pessimism has the e?ect of increasing (decreasing) equilibrium prices under Cournot (Bertrand) competition. In addition the e?ects 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.

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File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP0504.pdf
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Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 0504.

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Date of creation: 2005
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Handle: RePEc:exe:wpaper:0504
Contact details of provider: Postal: Streatham Court, Rennes Drive, Exeter EX4 4PU
Phone: (01392) 263218
Fax: (01392) 263242
Web page: http://business-school.exeter.ac.uk/about/departments/economics/

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  3. Burkhard C. Schipper & Juergen Eichberger & David Kelsey, 2006. "Granny versus Game Theorist: Ambiguity in Experimental Games," Working Papers 627, University of California, Davis, Department of Economics.
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  23. Ghirardato, Paolo & Marinacci, Massimo, 2002. "Ambiguity Made Precise: A Comparative Foundation," Journal of Economic Theory, Elsevier, vol. 102(2), pages 251-289, February.
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