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Title:Ambiguity and Social Interaction PDF Logo
Authors:Eichberger, Jürgen
Kelsey, David H.
Schipper, Burkhard C.
Issue Date:2003
Series/Report no.:Bonn econ discussion papers 2003,23
Abstract:We examine the impact of ambiguity on economic behaviour. We present a relatively non-technical account of ambiguity and show how it may be applied in economics. Optimistic and pessimistic responses to ambiguity are formally modelled. We show that pessimism has the effect of increasing (decreasing) equilibrium prices under Cournot (Bertrand) competition. We also examine the effects of ambiguity on peace processes. It is shown that ambiguity can act to select equilibria in coordination games with multiple equilibria. Some comparative statics results are derived for the impact of ambiguity in games with strategic complements.
Subjects:Ambiguity
Optimism
Oligopoly
Peace processes
Choquet expected utility
JEL:D81
D43
C72
D62
Document Type:Working Paper
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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