Abstract

We report the results of an experiment which investigates the impact of the manner in which likelihood information is presented to decision-makers on valuations assigned to lotteries. We find that subjects who observe representative sequences of outcomes attach higher valuations to lotteries than those who are given only a verbal description of a probability distribution. We interpret this in terms of a reduction in ambiguity about the possible lottery outcomes. These findings suggest that ambiguity aversion may be a confounding factor in reported experimental violations of expected utility theory based on verbal descriptions of probability distributions.