The best choice problem under ambiguity by Tatjana Chudjakow and Frank Riedel

By:

Tatjana Chudjakow & Frank Riedel [author]

Contributor(s):

Riedel, Frank [co-author]

Material type: Text

TextSeries: Economic theory ; Volume 54, number 1Heildelberg : Springer, 2013Content type:

text

Media type:

unmediated

Carrier type:

volume

Subject(s):

Ambiguity

LOC classification:

HB119 ECO

Online resources:

Click here to access online

Summary: 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.

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Holdings
Item type	Current library	Call number	Vol info	Copy number	Status	Notes	Date due	Barcode
Journal Article	Main Library - Special Collections	HB119 ECO (Browse shelf(Opens below))	vol. 54, no. 2 (pages 77-98)	SP21036	Not for loan	For In house Use

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Previous	HB119 ECO Information acquisition in conflicts	HB119 ECO A bargaining theory of the firm	HB119 ECO Essential equilibria of discontinuous games	HB119 ECO The best choice problem under ambiguity	HB119 ECO An alternative characterization of top trading cycles	HB119 ECO A full characterization of nash implementation with strategy space reduction	HB119 ECO Approximation results for discontinuous games with an application to equilibrium refinement	Next

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.

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