We study a principal-agent problem with multiple identical agents, where the action-dependent stochastic relationship between actions and output is perceived to be ambiguous, and agents are ambiguity averse. We argue that ambiguity, and particularly ambiguity aversion, make it more attractive for the principal to choose a tournament. If agents are risk neutral, but ambiguity averse, we show tha...

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This paper studies games with ambiguity averse agents, focusing on the relationship between preferences, beliefs over opponent’s preferences, and behaviour in normal form games. Using a carefully chosen 3×2 normal form game we find that a subject’s risk and ambiguity preferences affect the subject’s behaviour in normal form games in the direction suggested by economic theories. In contrast, we ...

Abstract This paper reflects on the notion of partial ambiguity. Using a framework decomposing ambiguity into distinct layers analysis, among which are risk and model uncertainty , allowing for different attitudes toward these layers, I show that may prove less desirable than full ambiguity, even under aversion. observation poses difficulties interpreting in relation to information available de...

In this entry for the Encyclopedia of Quantitative Finance I briefly review the decisiontheoretic literature on ambiguity, and discuss the consequences of ambiguity (and ambiguity aversion) for financial decision making.

We propose equilibrium notions for incomplete information games involving players who perceive ambiguity about the types of others. Players have smooth ambiguity preferences (Klibanoff, Marinacci and Mukerji, 2005) and may be ambiguity averse. In the smooth ambiguity model it is possible to hold the agents’information fixed while varying the agent’s ambiguity attitude from aversion to neutralit...

We test the implications of ambiguity aversion in a principal-agent problem with multiple agents. When output distributions are uncertain, models of ambiguity aversion suggest that tournaments may become more attractive than independent wage contracts, in contrast to the case where output distributions are known. We do so by presenting agents with a choice between tournaments and independent co...

We study incomplete information games of perfect recall involving players who perceive ambiguity and may be ambiguity averse. Our focus is on equilibrium concepts satisfying sequential optimality —each player’s strategy must be optimal at each stage given the strategies of the other players and the player’s conditional beliefs. We show that, for the purpose of identifying strategy profiles that...

Many men invest in their sisters’ children instead of their wives’. Existing theories addressing such behavior depend on the level of paternity probability in such men’s societies being implausibly low. I link this anthropologically observed investment behavior with the experimentally observed phenomenon that some individuals are ambiguity averse. Arguing that men’s decisions are made under amb...