Ambiguous Correlation

Abstract Many decisions are made in environments where outcomes are determined by the realization of multiple random events. A decision maker may be uncertain how these events are related. We identify and experimentally substantiate behavior that intuitively re ‡ects a lack of con…dence in their joint distribution. Our …ndings suggest a dimension of ambiguity which is di¤erent from that in the classical distinction between risk and "Knightian uncertainty." Boston University, [email protected] and University of Toronto, [email protected]. We are grateful for discussions with Kyoungwon Seo and Chew Soo Hong, for detailed comments from Aurelien Baillon and especially Peter Wakker, for insightful and thoughtful suggestions by two referees and the editor -Dimitri Vayanos, and for comments from audiences in several conferences and workshops