At any given point in time, the collection of assets existing in the economy is observable. Each asset is a function of a set of contingencies. The union taken over all assets of these contingencies is what we call the set of publicly known states. An innovation is a set of states that are not...

Empirical evidence suggests that ambiguity is prevalent in insurance pricing and underwriting, and that often insurers tend to exhibit more ambiguity than the insured individuals (e.g., Hogarth and Kunreuther (1989)). Motivated by these findings, we consider a problem of demand for insurance...