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An overview of economic applications of David Schmeidler`s models of decision making under uncertainty

Sujoy Mukerji () and Jean-Marc Tallon ()

No 165, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper surveys some economic applications of the decision theoretic framework pioneered by David Schmeidler. We have organized the discussion around three themes: financial markets, contractual arrangements and game theory. The first section discusses papers that have contributed to a better understanding of financial market outcomes based on ambiguity aversion. The second section focusses on contractual arrangements and is divided into two sub-sections. The first sub-section reports research on optimal risk sharing arrangements, while in the second sub-section, discusses research on incentive contracts. The third section concentrates on strategic interaction and reviews several papers that have extended different game theoretic solution concepts to settings with ambiguity averse players. A final section deals with several contributions that are linked only at a formal level, in terms of the pure mathematical structures involved, with Schmeidler`s models of decision making under ambiguity. The contributions involve issues such as, inequality measurement, intertemporal decision making and multi-attribute choice.

Keywords: Ellsberg Paradox; ambiguity aversion; uncertainty aversion. (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2003-07-01
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Working Paper: An overview of economic applications of David Schmeidler's models of decision making under uncertainty (2004)
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