Investor Sentiments

We consider a general class of games that have been used to model many economic problems where players’ sentiments are believed to play an important role. Dropping the common-prior assumption, we identify the relevant notion of sentiments for strate-gic behavior in these games. This notion is tied to how likely a player thinks that some other player has a more optimistic outlook than himself when they obtain their private information. Under this notion, we show that sentiments have a profound effect on strategic outcomes–even with vanishing uncertainty.