Hansen, Lars Peter; Sargent, Thomas J. - Becker Friedman Institute for Research in Economics, … - 2012
For each of three types of ambiguity, we compute a robust Ramsey plan and an associated worst-case probability model …. Ex post, ambiguity of type I implies endogenously distorted homogeneous beliefs, while ambiguities of types II and III … distinctions among the three types of ambiguity. We use recursive formulations of Ramsey problems to impose local predictability of …