This article explores the sale of an object to an ambiguity averse buyer. We show that the seller can increase his profit by using an ambiguous mechanism. That is, the seller can benefit from hiding certain features of the mechanism that he has committed to from the agent. We then characterize the profit maximizing mechanisms for the seller and characterize the conditions under which the seller can gain by employing an ambiguous mechanism. Finally, we propose a class of ambiguous mechanisms that are easy to implement and perform better than the best non-ambiguous mechanism.

We analyse an overlapping generations model of voting on “reform projects”. These resemble investments in that they first require some investment expenditure and later payoff. Since the time during which old people get the benefit is shorter, or because older people are more wealthy and hence pay more taxes, they are more conservative (against reforms) than young people. We show that if people vote on which majority should be required in future elections for a bill to become a law, the winning proposal specifies a supermajority. This result is very robust even if age related conflict is only one determinant among others for voting behaviour in the society.