Directly to content
  1. Publishing |
  2. Search |
  3. Browse |
  4. Recent items rss |
  5. Open Access |
  6. Jur. Issues |
  7. DeutschClear Cookie - decide language by browser settings

How do people cope with an ambiguous situation when it becomes even more ambiguous?

Eichberger, Jürgen and Oechssler, Jörg and Schnedler, Wendelin

[img]
Preview
PDF, German
Download (471Kb) | Terms of use

Citation of documents: Please do not cite the URL that is displayed in your browser location input, instead use the persistent URL or the URN below, as we can guarantee their long-time accessibility.

Abstract

As illustrated by the famous Ellsberg paradox, many subjects prefer to bet on events with known rather than with unknown probabilities, i.e., they are ambiguity averse. In an experiment, we examine subjects’ choices when there is an additional source of ambiguity, namely, when they do not know how much money they can win. Using a standard independence assumption, we show that ambiguity averse subjects should continue to strictly prefer the urn with known probabilities. In contrast, our results show that many subjects no longer exhibit such a strict preference. This should have important ramifications for modeling ambiguity aversion.

Item Type: Working paper
Date Deposited: 21. Jun 2012 14:47
Date: 2012
Faculties / Institutes: The Faculty of Economics and Social Studies > Alfred-Weber-Institut for Economics
Subjects: 330 Economics
Uncontrolled Keywords: ambiguity aversion , uncertainty , minmax-expected utility
Schriftenreihe ID: Discussion Paper Series / University of Heidelberg, Department of Economics
About | FAQ | Contact | Imprint |
OA-LogoLogo der Open-Archives-Initiative