ABSTRACT
What do ambiguity averse decision makers do when they are not picking balls out of urns—when they find themselves in contexts that are ‘more realistic’ in terms of economic institutions involved? In this part, the reader is provided with a sample of economic applications of the decision theoretic framework pioneered by David Schmeidler. Indeed, decision theoretic models are designed, at least in part, to eventually be used to answer questions about behavior and outcomes in interesting economic environments. Does it make a difference for the outcome of a given game, or market interaction or contractual arrangement if we were to assume that decision makers are ambiguity averse rather than Bayesian? What kind of insights are gained by introducing ambiguity averse agents in our economic models? What are the phenomena that can be explained in the ‘ambiguity aversion paradigm’ that did not have a (convincing) explanation in the expected utility framework? Do equilibrium conditions (e g rational expectations equilibrium or any sort of equilibrium in a game) that place constraints on agents' beliefs rule out certain types of beliefs and attitudes toward uncertainty? These are but a few of the questions that the contributions collected in this part of the volume have touched upon In this introduction we discuss these contributions along with several other chapters which while not included in the volume make important related points and therefore play a significant role in the literature
