This paper provides a micro-foundation for approximate incentive compatibility using ambiguity aversion. In particular, we propose a novel notion of approximate interim incentive compatibility, approximate local incentive compatibility, and establish an equivalence between approximate local...

A major theme in behavioral economics focuses on experimental evidence that individuals learn from the choice problems they face and consequently violate the consistency requirements of revealed preference theory. Despite the experimental evidence, the testable implications of such contextual...

The paper proposes a choice-theoretic de nition of an unforeseen event and a model of behavior that accommodates such events. The analysis presumes an individual who is aware of their unawareness, which explains why all un- foreseen events in this paper are non-null. Relative to existing work,...