Ambiguity and Social Interaction

We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. 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. In addition the effects of ambiguity on peace-making are examined. It is shown that ambiguity may select equilibria in coordination games with multiple equilibria. Some comparative statics results are derived for the impact of ambiguity in games with strategic complements

Comparative Statics for Market Games: The Strong Concavity Case

In this paper we study the effects of a change in sorne exogenous variable (the number of players or a parameter in the payoff functions) on the strategies played and payoffs obtained in a Nash Equilibrium in the framework of a Market Game (a generalization of the Cournot model)o We assume a strong concavity condition which implies that the best reply function of any player is decreasing on sum of the strategies of the remaining players (Le. strategic substitution). Our results generalize and unify those known in the Cournot model

Ambiguity and Social Interaction

We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. 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. In addition the effects of ambiguity on peace-making are examined. It is shown that ambiguity may select equilibria in coordination games with multiple equilibria. Some comparative statics results are derived for the impact of ambiguity in games with strategic complements.Ambiguity, Optimism, Pessimism, Strategic Games, Oligopoly, Strategic Delegation,Peace-making, Strategic Complements, Choquet Expected Utility

Privatization in oligopoly : the impact of the shadow cost of public funds

The aim of this paper is to investigate the welfare eect of privatization in oligopoly when the government takes into account the distortionary eect of rising funds by taxation (shadow cost of public funds). We analyze the impact of the change in ownership not only on the objective function of the rms, but also on the timing of competition by endogenizing the determination of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games. We show that, absent effciency gains, privatization never increases welfare. Moreover, even when large effciency gains are realized, an ineffcient public rm may be preferred

Privatization in oligopoly : the impact of the shadow cost of public funds

The aim of this paper is to investigate the welfare effect of privatization in oligopoly when the government takes into account the distortionary effect of raising funds by taxation (shadow cost of public funds). We analyze the impact of the change in ownership not only on the objective function of the firms, but also on the timing of competition by endogenizing the determination of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games. We show that, absent efficiency gains, privatization never increases welfare. Moreover, even when large efficiency gains are realized, an inefficient public firm may be preferred

Ambiguity and Social Interaction

We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. 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. In addition the effects of ambiguity on peace-making are examined. It is shown that ambiguity may select equilibria in coordination games with multiple equilibria. Some comparative statics results are derived for the impact of ambiguity in games with strategic complements.Ambiguity; Optimism; Pessimism; Strategic Games; Oligopoly; Strategic Delegation; Peace-making; Strategic Complements; Choquet Expected Utility

Ambiguity and Social Interaction

We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. 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. In addition the effects of ambiguity on peace-making are examined. It is shown that ambiguity may select equilibria in coordination games with multiple equilibria. Some comparative statics results are derived for the impact of ambiguity in games with strategic complements.

Ambiguity and Social Interaction

We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. 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. In addition the effects of ambiguity on peace-making are examined. It is shown that ambiguity may select equilibria in coordination games with multiple equilibria. Some comparative statics results are derived for the impact of ambiguity in games with strategic complements.Ambiguity, Optimism, Pessimism, Strategic Games, Oligopoly, Strategic Delegation, Peace-making, Strategic Complements, Choquet Expected Utility

Robust Quantitative Comparative Statics for a Multimarket Paradox

We introduce a quantitative approach to comparative statics that allows to bound the maximum effect of an exogenous parameter change on a system's equilibrium. The motivation for this approach is a well known paradox in multimarket Cournot competition, where a positive price shock on a monopoly market may actually reduce the monopolist's profit. We use our approach to quantify for the first time the worst case profit reduction for multimarket oligopolies exposed to arbitrary positive price shocks. For markets with affine price functions and firms with convex cost technologies, we show that the relative profit loss of any firm is at most 25% no matter how many firms compete in the oligopoly. We further investigate the impact of positive price shocks on total profit of all firms as well as on social welfare. We find tight bounds also for these measures showing that total profit and social welfare decreases by at most 25% and 16.6%, respectively. Finally, we show that in our model, mixed, correlated and coarse correlated equilibria are essentially unique, thus, all our bounds apply to these game solutions as well.Comment: 23 pages, 1 figur