The Best Choice Problem under Ambiguity

Tatjana Chudjakow and Frank Riedel
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Tatjana Chudjakow: Center for Mathematical Economics, Bielefeld University

No 413, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

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 decision 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 minimax backward induction. As in the classical case the derived stopping strategy is simple. Ambiguity can lead to substantial differences to the classical threshold rule.

Keywords: Best choice problem; Secretary problem; Optimal stopping; Ambiguity (search for similar items in EconPapers)
Date: 2010-12-14
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (2)

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https://pub.uni-bielefeld.de/download/1943958/2319759 First Version, 2009 (application/pdf)

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Journal Article: The best choice problem under ambiguity (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:413

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