Author : Zachary Eugene Dorobiala
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (139 download)
Book Synopsis Three Essays on the Role of Ambiguity in Games and Markets by : Zachary Eugene Dorobiala
Download or read book Three Essays on the Role of Ambiguity in Games and Markets written by Zachary Eugene Dorobiala and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many economic decisions are made under conditions of uncertainty, specifically decisions where the exact probabilities associated with specific outcomes are unknown. The formal study of ambiguity dates back to Ellsberg's famous thought experiment that shed light on the difference between risk (known uncertainty) and ambiguity (unknown uncertainty). His study showed that decision-makers treat betting on events with known uncertainty differently than those with unknown uncertainty. My work expands the applications of these approaches to economic activities to provide more predictive insights into behavior. Chapter 1 employs experimental methods to examine the effect of exogenous ambiguity on price dispersion and price levels in an asymmetric, two-firm market. This market contains two types of consumers- informed consumers, who purchase the good from the lowest priced firm, and uninformed consumers, who buy from the firm to whom they are brand loyal. In this market, ambiguity is exogenously placed on the share of uninformed consumers. This ambiguity about the uninformed consumer is presented to the firms as an unknown distribution over an interval of potential consumers. The behavioral results reveal empirical evidence that ambiguity affects duopoly pricing markets. Chapter 2 again relies on laboratory experiments to examine strategic ambiguity in two-person games. The three strategic games include: a modified dominant-strategy Tullock contest, a Minimum-effort Coordination game, and a classic zero-sum Rock-Paper-Scissors game. In each setting, we collected the player's beliefs about what their opponent will play and the player's actual choice within each game. Additionally, including a non-strategic setting, a three-color Ellsberg urn task, to play the role of a non-strategic analog to the Rock-Paper-Scissors game. Within these four settings, we examine and find stable ambiguity attitudes and varying perceptions of ambiguity. Chapter 3 explores global excess returns using naturally occurring international asset pricing data. We decompose the excess market return into a speculation (sentiment) and a non-speculation (risk) component. This decomposition enables us to make four main contributions to sources of risk in global equity markets. The results are borne out in regressions where we test each separately and jointly in kitchen sink regressions.