Eliciting ambiguity aversion in unknown and in compound lotteries: a smooth ambiguity model experimental study

Theory and Decision 77 (4):485-530 (2014)
  Copy   BIBTEX


Coherent-ambiguity aversion is defined within the smooth-ambiguity model as the combination of choice-ambiguity and value-ambiguity aversion. Five ambiguous decision tasks are analyzed theoretically, where an individual faces two-stage lotteries with binomial, uniform, or unknown second-order probabilities. Theoretical predictions are then tested through a 10-task experiment. In tasks 1–5, risk aversion is elicited through both a portfolio choice method and a BDM mechanism. In tasks 6–10, choice-ambiguity aversion is elicited through the portfolio choice method, while value-ambiguity aversion comes about through the BDM mechanism. The behavior of over 75 % of classified subjects is in line with the KMM model in all tasks 6–10, independent of their degree of risk aversion. Furthermore, the percentage of coherent-ambiguity-averse subjects is lower in the binomial than in the uniform and in the unknown treatments, with only the latter difference being significant. The most part of coherent-ambiguity-loving subjects show a high risk aversion.



    Upload a copy of this work     Papers currently archived: 93,642

External links

Setup an account with your affiliations in order to access resources via your University's proxy server

Through your library

Similar books and articles

A belief-based definition of ambiguity aversion.Xiangyu Qu - 2015 - Theory and Decision 79 (1):15-30.


Added to PP

11 (#351,772)

6 months
45 (#342,028)

Historical graph of downloads
How can I increase my downloads?

Author's Profile