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...

This paper examines efficient allocations in economies where consumers exhibit heterogeneous smooth ambiguity preferences and face model uncertainty with a common set of identifiable models. Aggregate endowment is ambiguous. We characterize economies where the representative consumer is of the...

Heterogeneous beliefs among market participants can lead to questionable speculative trading that goes beyond any risk-sharing motives. We demonstrate that such unwarranted betting behavior in market equilibrium can be mitigated by introducing nonlinear pricing for ambiguous contracts, without...

In diffusion models, few suitably chosen financial securities allow to complete the market. As a consequence, the efficient allocations of static Arrow-Debreu equilibria can be attained in Radner equilibria by dynamic trading. We show that this celebrated result generically fails if there is...

The allocation of a co-owned company to a single owner using the Texas Shoot-Out mechanism with private valuations is investigated. We identify Knightian Uncertainty about the peer's distribution as the reason for its deterrent effect of an immature dissolving. Modeling uncertainty by a compact...