This text reviews a recent approach to modeling "radically uncertain" behavior in strategic interactions. By rigorously rooting the approach in decision theory, we provide a foundation for applications of Knightian uncertainty in mechanism design, principal agent and moral hazard models. We...

We propose a framework for normal form games where players can use Knightian uncertainty strategically. In such Ellsberg games, ambiguity–averse players may render their actions objectively ambiguous by using devices such as Ellsberg urns, in addition to the standard mixed strategies. While...

We investigate consequences of ambiguity on efficient allocations in an exchange economy. Ambiguity is embodied in the model uncertainty perceived by the consumers: they are unsure what would be the appropriate probability measure to apply to evaluate consumption and keep in consideration a set...