First-price Sealed-bid Auctions with Smoothly Ambiguity Averse Bidders
Work in progress
with Frank Riedel
Short abstract. We study first-price sealed-bid auctions with risk-neutral bidders who are
smoothly ambiguity averse about opponents’ valuations. The model separates ambiguity from risk, delivers a
unique symmetric monotone equilibrium, and maps bidding behavior to an observationally equivalent
correlated-private-values expected-utility auction. Greater ambiguity aversion induces more aggressive
bidding and changes the first-price/second-price comparison: first-price auctions narrow the seller’s
revenue range across priors, while bidder welfare admits no uniform ranking.
Ambiguous Contracts with an \(\alpha\)-MEU Agent
Work in progress
Short abstract. We study ambiguous contracts in a finite moral-hazard model with an
\(\alpha\)-MEU agent. For \(\alpha < 1\), consistency is not without loss of generality: inconsistent
payment sets may strictly improve the principal’s payoff, so consistency becomes a substantive credibility
restriction. Under consistency, we obtain sharp implementability thresholds, show that the
single-outcome-payment characterization generally fails for \(\alpha \in (0,1)\), and prove that any
consistent incentive-compatible ambiguous contract can be reduced to at most \(n-1\) payment functions.
