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Optimism and Pessimism in Games

Author

Listed:
  • Jurgen Eichberger

    (Alfred Weber Institut, Universitat Heidelberg, Germany)

  • David Kelsey

    (Department of Economics, University of Exeter)

Abstract

This 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 propose a new solution concept for players who may express ambiguity- preference. Then we study comparative statics of changes in ambiguity-attitude in games with strategic complements. This gives a precise statement of the impact of ambiguity on economic behaviour.

Suggested Citation

  • Jurgen Eichberger & David Kelsey, 2009. "Optimism and Pessimism in Games," Discussion Papers 0905, Exeter University, Department of Economics.
  • Handle: RePEc:exe:wpaper:0905
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    File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP0905.pdf
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    Citations

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    Cited by:

    1. Thomas Jungbauer & Klaus Ritzberger, 2011. "Strategic games beyond expected utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 377-398, October.
    2. David Kelsey & Tigran Melkonyan, 2014. "Contests with Ambiguity," Discussion Papers 1411, Exeter University, Department of Economics.
    3. David Kelsey & Sara Roux, 2015. "An experimental study on the effect of ambiguity in a coordination game," Theory and Decision, Springer, vol. 79(4), pages 667-688, December.
    4. Calford, Evan, 2016. "Mixed Strategies in Games with Ambiguity Averse Agents," MPRA Paper 74909, University Library of Munich, Germany.
    5. Craig Webb, 2015. "Piecewise additivity for non-expected utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 371-392, October.
    6. Daniel Laskar, 2013. "Ambiguity, Pessimism, Optimism and Financial Crises in a Simple Global Game Model," Working Papers hal-00811923, HAL.
    7. 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.
    8. Daniel Laskar, 2013. "Ambiguity, Pessimism, Optimism and Financial Crises in a Simple Global Game Model," PSE Working Papers hal-00811923, HAL.
    9. Jürgen Eichberger & David Kelsey, 2011. "Are the treasures of game theory ambiguous?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 313-339, October.
    10. Stauber, Ronald, 2017. "Irrationality and ambiguity in extensive games," Games and Economic Behavior, Elsevier, vol. 102(C), pages 409-432.
    11. Evan Calford, 2017. "Uncertainty Aversion in Game Theory: Experimental Evidence," Purdue University Economics Working Papers 1291, Purdue University, Department of Economics.
    12. Nicolas Lampach & Kene Boun My & Sandrine Spaeter, 2016. "Risk, Ambiguity and Efficient Liability Rules: An experiment," Working Papers of BETA 2016-30, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    13. Dominiak, Adam & Eichberger, Jürgen, 2016. "Support notions for belief functions," Economics Letters, Elsevier, vol. 146(C), pages 28-32.
    14. repec:kap:theord:v:82:y:2017:i:3:d:10.1007_s11238-016-9569-5 is not listed on IDEAS
    15. Christopher Boortz, 2016. "Irrational Exuberance and Herding in Financial Markets," SFB 649 Discussion Papers SFB649DP2016-016, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    16. Azrieli, Yaron & Teper, Roee, 2011. "Uncertainty aversion and equilibrium existence in games with incomplete information," Games and Economic Behavior, Elsevier, vol. 73(2), pages 310-317.
    17. Dominiak, Adam & Lee, Min Suk, 2017. "Coherent Dempster–Shafer equilibrium and ambiguous signals," Journal of Mathematical Economics, Elsevier, vol. 68(C), pages 42-54.

    More about this item

    Keywords

    Ambiguity in games; support; strategic complementarity; optimism; multiple equilibria.;

    JEL classification:

    • 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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