Related papers: Higher-Order Ambiguity Attitudes
This article introduces a framework for evaluating statistical decisions under both prior ambiguity and likelihood misspecification. We begin with an ambiguity set - a frequentist model that pairs a possibly misspecified likelihood with…
Preferences for mixing can reveal ambiguity perception and attitude on a single event. The validity of the approach is discussed for multiple preference classes including maxmin, maxmax, variational, and smooth second-order preferences. An…
Ambiguity is an intrinsic feature of natural language. Managing ambiguity is a key part of human language understanding, allowing us to anticipate misunderstanding as communicators and revise our interpretations as listeners. As language…
How do entrepreneurs act on their beliefs when probabilities of outcomes are unknown but subjectively perceived? We theorize that two distinct dimensions of ambiguity attitudes influence entrepreneurial action: ambiguity aversion - the…
We propose and axiomatize a new model of incomplete preferences under uncertainty, which we call \textit{hope-and-prepare preferences}. An act is considered more desirable than an other act when, and only when, both an optimistic…
Completeness and transitivity are standard rationality conditions in economics. However, under ambiguity, decision makers sometimes violate these requirements because of the difficulty of forming accurate predictions about ambiguous events.…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
We consider finite games in strategic form with Choquet expected utility. Using the notion of (unambiguously) believed, we define Choquet rationalizability and characterize it by Choquet rationality and common beliefs in Choquet rationality…
Ambiguity and ambiguity aversion have been widely studied in decision theory and economics both at a theoretical and an experimental level. After Ellsberg's seminal studies challenging subjective expected utility theory (SEUT), several…
We explore the deliberate infusion of ambiguity into the design of contracts. We show that when the agent is ambiguity-averse and hence chooses an action that maximizes their minimum utility, the principal can strictly gain from using an…
We show how risk measures originally defined in a model free framework in terms of acceptance sets and reference assets imply a meaningful underlying probability structure. Hereafter we construct a maximal domain of definition of the risk…
A range of empirical puzzles in finance has been explained as a consequence of traders being averse to ambiguity. Ambiguity averse traders can behave in financial portfolio problems in ways that cannot be rationalized as maximizing…
Understanding adaptive human driving behavior, in particular how drivers manage uncertainty, is of key importance for developing simulated human driver models that can be used in the evaluation and development of autonomous vehicles.…
We propose and axiomatize preferences on a product state space in light of uncertainty regarding the dependency of different payoff-relevant factors. Dependence structures allow to decompose probabilities and allow to pin down behavior…
We introduce a way to compare actions in decision problems. One action is safer than another if the set of beliefs at which the decision-maker prefers the safer action expands as the decision-maker becomes more risk averse. We provide a…
By specifying model free preferences towards simple nested classes of lottery pairs, we develop the dual story to stand on equal footing with that of (primal) risk apportionment. The dual story provides an intuitive interpretation, and full…
Consider a predictor who ranks eventualities on the basis of past cases: for instance a search engine ranking webpages given past searches. Resampling past cases leads to different rankings and the extraction of deeper information. Yet a…
This paper proposes a model of decision-making under uncertainty in which an agent is constrained in her cognitive ability to consider complex acts. We identify the complexity of an act according to the corresponding partition of state…
Meta-training agents with memory has been shown to culminate in Bayes-optimal agents, which casts Bayes-optimality as the implicit solution to a numerical optimization problem rather than an explicit modeling assumption. Bayes-optimal…
I revisit the standard moral-hazard model, in which an agent's preference over contracts is rooted in costly effort choice. I characterise the behavioural content of the model in terms of empirically testable axioms, and show that the…