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OPTIMISM AND PESSIMISM IN GAMES
Author(s) -
Eichberger Jürgen,
Kelsey David
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12058
Subject(s) - ambiguity , ambiguity aversion , comparative statics , optimism , mathematical economics , preference , class (philosophy) , economics , pessimism , microeconomics , computer science , psychology , social psychology , epistemology , artificial intelligence , philosophy , programming language
This article considers the impact of ambiguity in strategic situations. It extends the existing literature on games with ambiguity‐averse players by allowing for optimistic responses to ambiguity. We use the CEU model of ambiguity with a class of capacities introduced by Jaffrray and Philippe ( Mathematics of Operations Research 22 (1997), 165–85), which allows us to distinguish ambiguity from ambiguity‐attitude, and propose a new solution concept, equilibrium under ambiguity (EUA), for players who may be characterized by ambiguity‐preference. Applying EUA, we study comparative statics of changes in ambiguity‐attitude in games with strategic complements. This extends work in Eichberger and Kelsey ( Journal of Economic Theory 106 (2002), 436–66) on the effects of increasing ambiguity if players are ambiguity averse.