Cooperation with Strategy-Dependent Uncertainty Attitude
The paper shows that in a Prisoner’s Dilemma Knightian uncertainty, formalised by multiple priors, may entail cooperation at a generalised Nash Equilibrium. The main idea is that players may have an attitude towards uncertainty that depends upon their available strategies. In particular, if players anticipate to be sufficiently more optimistic when choosing to cooperate, than when defecting, then they may indeed cooperate. Though uncommon in economic modelling, choice-dependent uncertainty attitude formalises a behaviour which is well understood and widely accepted by cognitive psychologists, within the theory of Cognitive Dissonance.
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- Lo, Kin Chung, 1996.
"Equilibrium in Beliefs under Uncertainty,"
Journal of Economic Theory,
Elsevier, vol. 71(2), pages 443-484, November.
- Kin Chung Lo, 1995. "Equilibrium in Beliefs Under Uncertainty," Working Papers ecpap-95-02, University of Toronto, Department of Economics.
- Lo, Kin Chung, 1999. "Extensive Form Games with Uncertainty Averse Players," Games and Economic Behavior, Elsevier, vol. 28(2), pages 256-270, August.
- Kin Chung Lo, 1995. "Extensive Form Games with Uncertainty Averse Players," Working Papers ecpap-95-03, University of Toronto, Department of Economics.
- Marinacci, Massimo, 2000. "Ambiguous Games," Games and Economic Behavior, Elsevier, vol. 31(2), pages 191-219, May.
- Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
- David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
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