Costs and Benefits of Strategic Uncertainty: Theory and (Preliminary) Experiments
LocationUvA - E-building, Roetersstraat 11, Room E5.22
Date and time
April 11, 2019
16:00 - 17:15
We develop a new theory of how strategic uncertainty -- uncertainty about other people's actions -- can influence economic behavior. We do so by building on research in psychology on theory of mind. Importantly, strategic uncertainty can be a cost or a benefit depending on the economic environment. This is true even in settings where people's primary motivation is to coordinate their actions. Preliminary experimental findings offer support for the theory and suggest that theory of mind is an important mediator for the economic effects of strategic uncertainty. This talk builds on joint work with Nagore Iriberri (University of the Basque Country) and Alvaro Sandroni (Northwestern University).
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