The extant supply chain management literature has not addressed the issue of coordination in supply chains involving risk-averse agents. We take up this issue and begin with defining a coordinating contract as one that results in a Pareto-optimal solution acceptable to each agent. Our definition...

This paper studies sequential information acquisition by an ambiguity-averse decision maker (DM), who decides how long to collect information before taking an irreversible action. The agent optimizes against the worst-case belief and updates prior by prior. We show that the consideration of...

In “Coordination of Supply Chains with Risk-Averse Agents” (POMS, Volume 13, 2004), we study the issue of coordination in supply chains involving risk-averse agents, and define a coordinating contract as one that results in a Pareto-optimal solution acceptable to each agent. We then develop...

We develop a theory of optimal stopping problems under ambiguity in continuous time. Using results from (backward) stochastic calculus, we characterize the value function as the smallest (nonlinear) supermartingale dominating the payoff process. For Markovian models, we derive an adjusted...

We analyze several exotic options of American style in a multiple prior setting and study the optimal exercise strategy from the perspective of an ambiguity averse buyer in a discrete time model of Cox-Ross-Rubinstein style. The multiple prior model relaxes the assumption of a known distribution...

We consider optimal stopping problems for ambiguity averse decision makers with multiple priors. In general, backward induction fails. If, however, the class of priors is time-consistent, we establish a generalization of the classical theory of optimal stopping. To this end, we develop first...

We propose a novel one-sector stochastic growth model, where producitivity growth follows a Markov-switching process with two regimes, and where households have generalized recursive smooth ambiguity preferences. The adopted class of preferences permits a three-way separation of risk aversion,...

This paper explicitly solves, in closed form, the optimal consumption and port folio choice for an ambiguity averse investor in a Merton-type two assets economy where a risk premium follows a mean-reverting process. The investor's preferences are represented by the recursive multiple priors...

We investigate American options in a multiple prior setting of continuous time and determine optimal exercise strategies form the perspective of an ambiguity averse buyer. The multiple prior setting relaxes the presumption of a known distribution of the stock price process and captures the idea...

This paper examines a continuous-time intertemporal consumption and portfoliochoice problem for an investor with Duffie and Epstein (1992a)’s recursive preferenceswho worries about model misspecification (model uncertainty) and wants toseek robust decision rules. The expected excess return of...