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This paper characterizes the effects of ambiguity aversion under
dispersed information. The equilibrium outcome is observationally
equivalent to a Bayesian forecast of the fundamental with increased
sensitivity to signals and a pessimistic bias. This equivalence result
takes a simple form that accommodates dynamic information and
strategic interactions. Applying the result, we show that ambiguity
aversion helps rationalize the joint empirical pattern between the
bias and persistence of inflation forecasts conditional on household
income. In a policy game à la Barro and Gordon (1983) with
ambiguity-averse agents, the policy rule features higher average
inflation and increased responsiveness to fundamentals.
