We test the implications of ambiguity aversion in a principal-agent problem with multiple agents. Models of ambiguity aversion suggest that, under ambiguity, comparative compensation schemes may become more attractive than independent wage contracts. We test this by presenting agents with a...

Raiffa (1961) criticizes ambiguity-averse preferences by claiming that hedging is possible with randomization of choices. We argue that the timing of randomization is crucial for hedging. Ex-ante randomizations, which are randomizations before a state is realized, could provide only ex-ante...

We present a decision theory which models and axiomatizes a decision-making procedure. This procedure involves two steps: in the first step, for each action, some specific event which can bring about a relatively high outcome with a relatively high probability or a relatively low outcome with a...

We introduce a simple, easy to implement instrument for jointly eliciting risk and ambiguity attitudes. Using this instrument, we structurally estimate a two-parameter model of preferences. Our findings indicate that ambiguity aversion is significantly overstated when risk neutrality is assumed....