Project Details
Projekt
AmbiDyn Ambiguity in Dynamic Environments
Subject Area
Economic Theory
Term
from 2018 to 2022
Project identifier
Deutsche Forschungsgemeinschaft (DFG) - Project number 396833577
Uncertainty plays a fundamental role in financial markets and strategic conflicts. In many real-world situations, it is not possible to model uncertainty by means of well-defined probability distributions. Instead, participants face Knightian uncertainty: they do not know the exact probability distribution over possible outcomes. In view of this, it is important to incorporate such Knightian uncertainty or ambiguity into the analysis of markets and strategic conflicts. This project aims to clarify the foundations for ambiguity in dynamic financial markets and strategic interactions. As a by-product, we aim to unify different (extant) approaches to modeling preferences and decision making in games under ambiguity. The issue of dynamic consistency will now be of particular concern.We apply our newly developed theoretical tools to a concrete economic problems by studying in detail the consequences of Knightian uncertainty in strategic interactions like dynamic contracts and elections on the one hand, as well as in markets under uncertainty, including portfolio choice and asset pricing with heterogeneous agents and incomplete information.
DFG Programme
Research Grants
International Connection
France, United Kingdom
