Article ID Journal Published Year Pages File Type
5058961 Economics Letters 2014 4 Pages PDF
Abstract

•Ambiguity is introduced in a simple 2×2 global game.•Larger ambiguity is shown to reduce the amount of coordination each player perceives.•This is a new channel of the effect of ambiguity in global games.•Small uncertainty with ambiguity tends to select the Pareto dominated equilibrium.•Implications for global game models of financial crises are drawn.

In a global game, larger ambiguity is shown to decrease the amount of coordination each player perceives. Consequently, small uncertainty tends to select the Pareto dominated equilibrium of the game without uncertainty. Implications for models of financial crises are drawn.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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