Uncertainty has become a hallmark of today’s societies; think of environmental and climate policy, financial markets and their crises, health and pandemics, long-run stability of pension systems, or digitalization and technological development. Contrary to earlier episodes of uncertainty, however, the environmental, demographic, economic, and technological uncertainty we experience these days is perceived as persistent, as opposed to being a consequence of lacking experience in a new environment. This raises new positive and normative questions: How can we live with persistent uncertainty, and how should we live with it? With the proposed RTG, we aim at improving our understanding of these (in spirit) classical economic questions, taking recent events and new methodological insights into account.
In the analysis of dynamic economic models under uncertainty, we effectively bundle the strengths of many economists in Bielefeld, who have extensively studied dynamic games from theoretical, empirical and behavioral perspectives, and the mathematical economists at the IMW with their expertise in Knightian uncertainty. With this foundation, the proposed research training group seeks to (i) provide new methods and models to deal with complex economic problems in dynamic environments that involve Knightian uncertainty, and (ii) develop applied work involving these methods and models to advance sound theoretical and empirical analyses of (some of) the challenges that come with the novel type of economic problems. In this way, we hope to initiate the rigorous investigation—grounded in fundamental research in decision and game theory, industrial organization, finance, and labor markets—that problems associated with uncertain dynamics deserve, accompanied with new empirical approaches that are based on theoretical models to provide a foundation for policy recommendations, and most importantly, to train new researchers to further the analysis of the complex phenomena re-shaping our world so dramatically at present.
The RTG’s program can be divided into three research areas. Area A studies the foundations of individual and social behavior under uncertainty and dynamics. Area B focuses on implications of uncertainty in markets and strategic interactions, while area C addresses questions of policy and welfare. The natural overlap between these areas results in a high degree of interaction of the participating scientists—and thereby also in a high degree of interaction between the research topics we plan to work on.