The best choice problem under ambiguity
Tatjana Chudjakow and
Frank Riedel
Economic Theory, 2013, vol. 54, issue 1, 77-97
Abstract:
We model and solve best choice problems in the multiple prior framework: An ambiguity averse decision maker aims to choose the best among a fixed number of applicants that appear sequentially in a random order. The agent faces ambiguity about the probability that a candidate—a relatively top applicant—is actually best among all applicants. We show that our model covers the classical secretary problem, but also other interesting classes of problems. We provide a closed form solution of the problem for time-consistent priors using backward induction. As in the classical case, the derived stopping strategy is simple. Ambiguity can lead to substantial differences to the classical threshold rule. Copyright Springer-Verlag 2013
Keywords: Optimal stopping; Ambiguity; Uncertainty aversion; Secretary problem; Best choice problems; D81; C61 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)
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Working Paper: The Best Choice Problem under Ambiguity (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:54:y:2013:i:1:p:77-97
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DOI: 10.1007/s00199-012-0715-1
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