The best choice problem under ambiguity
Tatjana Chudjakow & Frank Riedel
The best choice problem under ambiguity by Tatjana Chudjakow and Frank Riedel - Economic theory Volume 54, number 1 .
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 agent 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 backward induction. As in the classical case, the derived stopping strategy is simple. Ambiguity can lead to substantial differences to the classical threshold rule.
Ambiguity
HB119 ECO
The best choice problem under ambiguity by Tatjana Chudjakow and Frank Riedel - Economic theory Volume 54, number 1 .
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 agent 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 backward induction. As in the classical case, the derived stopping strategy is simple. Ambiguity can lead to substantial differences to the classical threshold rule.
Ambiguity
HB119 ECO