We give a formal treatment of optimal risk sharing contracts in the face of ambiguity. The central idea is that … ambiguity in a contract arises from contractual clauses that are interpreted by the parties in different ways. The cost of … ambiguity is represented in terms of dispute costs. Taking the potential for dispute into account, we find that risk averse …

We present a formal treatment of contracting in the face of ambiguity. The central idea is that boundedly rational …, we analyze the effects of ambiguity on contracting. We find that risk averse agents will engage in ambiguous contracts … for risk sharing reasons. We provide an application where ambiguity motivates the use of a liquidated damages contract. …

We consider the optimality of liquidated damages contracts in a setting of contractual ambiguity and potential for … disputes. We show that when parties are ambiguity averse enough, they will optimally choose liquidated damages contracts and …

In Ghirardato, Macheroni and MArcinaccri (GMM) propose a method for distinguishing between percieved ambiguity and the … subclass of a-MEU preferences. We show that for Hurwicz preferences the proposed measure of ambiguity depends on parameters … which intuitively reflect ambiguity-attitude. Furthermore, any a-MEU preferences which satisfy the CEU axioms, satisfy GMM …

In [7] Ghirardato, Macheroni and Marinacci (GMM) propose a method for distinguishing between perceived ambiguity and …