Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/22871 
Year of Publication: 
2003
Series/Report no.: 
Bonn Econ Discussion Papers No. 23/2003
Publisher: 
University of Bonn, Bonn Graduate School of Economics (BGSE), Bonn
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

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