We analyze three rules for updating neo-additive capacities. Only for Generalized Bayesian Updating is relative optimism the same for both updated and unconditional capacities. For updates of the other two, either the updated capacity is fully optimistic or fully pessimistic.

Least-Unmatched Price Auctions have become a popular format of TV and radio shows. Increasingly, they are also applied in internet trading. In these auctions the lowest single (unique) bid wins. We analyze the game-theoretic solution of least unmatched price auctions when prize, bidding cost and...

We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. Optimistic and pessimistic responses to ambiguity are formally modelled. We show that pessimism has the effect of increasing (decreasing) equilibrium prices under...

Ambiguity refers to a decision situation under uncertainty when there is incomplete information about the likelihood of events. Different formal models of this notion have been developed with differing implications about the representation of ambiguity and ambiguity aversion.

In this paper, we consider a decision-maker who tries to learn the distribution of outcomes from previously observed cases. For each observed sequence of cases the decision-maker predicts a set of priors expressing his beliefs about the underlying probability distribution. We impose a version of...

We study the impact of ambiguity on two alternative institutions of financial intermediation in an economy where consumers face uncertain liquidity needs. The ambiguity the consumers experience is modeled by the degree of confidence in their additive beliefs. We analyze the optimal liquidity...

In this paper we suggest a behavioral approach to decision making under ambiguity based on available information. A decision situation is characterized by a set of actions, a set of outcomes, and data consisting of action-outcome pairs. Decision-makers express preferences over actions and data...

In Ghirardato et al. (2004) [7], Ghirardato, Macheroni and Marinacci propose a method for distinguishing between perceived ambiguity and the decision-maker[modifier letter apostrophe]s reaction to it. They study a general class of preferences which they refer to as invariant biseparable. This...

This paper studies how updating affects ambiguity-attitude. In particular we focus on the generalized Bayesian update of the Jaffray-Phillipe sub-class of Choquet Expected Utility preferences. We find conditions for ambiguity-attitude to be the same before and after updating. A necessary and...