Prominent models such as MEU/α-MP and KMM interpret ambiguity aversion as aversion against second-order risks associated with ambiguous acts. We design an experiment where the decision maker draws twice with replacement in the typical Ellsberg two-color urns, but with a different color winning...

Prominent models such as maxmin expected utility/alpha-multiprior (MEU/ a -MP) and Klibanoff, Marinacci, and Mukerji (KMM) interpret ambiguity aversion as aversion against second-order risks associated with ambiguous acts. We design an experiment where the decision maker draws twice with...

We study the two-color problem by Ellsberg (1961) with the modification that the decision maker draws twice with replacement and a different color wins in each draw. The 50-50 risky urn turns out to have the highest risk conceivable among all prospects including the ambiguous one, while all...

Prominent models such as maxmin expected utility/alpha-multiprior (MEU/ a -MP) and Klibanoff, Marinacci, and Mukerji (KMM) interpret ambiguity aversion as aversion against second-order risks associated with ambiguous acts. We design an experiment where the decision maker draws twice with...

In this paper, we propose a new channel of contract design to boost efficiency. If deviating from one's own words induces a self-imposed moral burden, the optimal contracting procedure with regard to cheap talk shall assign the responsibility for installing the nonbinding promise in the contract...

We study experimentally how entry into a market with uncertain capacity is affected by the type of information potential entrants have available. Our focus is on behavior in a two-market entry game. In the risky information market there are two possible market capacities, both known to occur...

This paper studies socially responsible behavior in markets. We develop a laboratory product market in which low-cost production creates a negative externality for third parties, but where alternative production with higher costs mitigates the externality. Our first study, conducted in...