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Attitudes towards Uncertainty and Randomization: An Experimental Study

Dominiak, Adam ; Schnedler, Wendelin

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Abstract

Individuals exhibit a randomization preference if they prefer random mixtures of two bets to each of the involved bets. Such preferences provide the foundation of various models of uncertainty aversion. However, it has to our knowledge not been empirically investigated whether uncertainty-averse decision makers indeed exhibit such preferences. Here, we examine the relationship experimentally. We find that uncertainty aversion is not positively associated with randomization preferences. Moreover, we observe choices that are not consistent with the prevailing theories of uncertainty aversion: a non-negligible number of uncertain-averse subjects seem to dislike randomization.

Document type: Working paper
Date Deposited: 07 Jan 2010 08:55
Date: 2009
Faculties / Institutes: The Faculty of Economics and Social Studies > Alfred-Weber-Institut for Economics
DDC-classification: 330 Economics
Uncontrolled Keywords: uncertainty aversion , randomization preference , ambiguity , Choquet expected utility model , maxmin expected utility model , experiment
Series: Discussion Paper Series / University of Heidelberg, Department of Economics
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