Many decisions involve both imprecise probabilities and intractable states of the world. Objective expected utility assumes unambiguous probabilities; subjective expected utility assumes a completely specified state space. This paper analyzes a third domain of preference: sets of consequential lotteries. Using this domain, we develop a theory of Knightian ambiguity without explicitly invoking a...

We propose to bring together two conceptually complementary ideas: (1) selfcon…rming equilibrium (SCE): at rest points of learning dynamics in a game played recurrently, agents best respond to con…rmed beliefs, i.e., beliefs consistent with the evidence they accumulated, and (2) ambiguity aversion: agents, other things being equal, prefer to bet on events with known rather than unknown probabil...

When confronted with uncertain prospects, people often exhibit both choice deferral and Ellsberg-type ambiguity aversion. This paper obtains a joint representation for these behavioral phenomena. The decision maker as portrayed by my model is willing to choose an uncertain prospect f over g rather than to defer this choice if and only if the expected utility of f is greater that or equal to the...

We study the question of auction design in an IPV setting characterized by ambiguity. We assume that the preferences of agents exhibit ambiguity aversion; in particular, they are represented by the epsilon-contamination model. We show that a simple variation of a discrete Dutch auction can extract almost all surplus. This contrasts with optimal auctions under IPV without ambiguity as well as wi...

BACKGROUND Anticoagulation is the therapeutic paradigm for stroke prevention in patients with atrial fibrillation (AF). It is unknown how physicians make treatment decisions in primary stroke prevention for patients with AF. OBJECTIVES To evaluate the association between family physicians' risk preferences (aversion risk and ambiguity) and therapeutic recommendations (anticoagulation) in the ...

The robustness of the Bayes–Nash equilibrium prediction for seller revenue in auctions is investigated. In a framework of interdependent valuations generated from independent signals, seller expected revenue may fall well below the equilibrium prediction, even though the individual payoff consequences of suboptimal bidding may be small for each individual bidder. This possibility would be relev...

Subjective uncertainty is characterized by ambiguity if the decision maker has an imprecise knowledge of the probabilities of payo€ relevant events. In such an instance, the decision maker's beliefs are better represented by a set of probability functions than by a unique probability function. An ambiguity averse decision maker adjusts his choice on the side of caution in response to his imprec...

Information ambiguity and conflict are prevalent in insurance decision because experts may not agree on the probability of the risk. This research investigates insurance decision under either ambiguous and consensual or ambiguous and conflicting information about the probability of the risk. Seventy-eight professional insurers completed a questionnaire that contained two scenario: ”Pollution” a...