Abstract
An extension to Ellsberg's experiment demonstrates that attitudes to ambiguity and compound objective lotteries are tightly associated. The sample is decomposed into three main groups: subjective expected utility subjects, who reduce compound objective lotteries and are ambiguity neutral, and two groups that exhibit different forms of association between preferences over compound lotteries and ambiguity, corresponding to alternative theoretical models that account for ambiguity averse or seeking behavior.
| Original language | English |
|---|---|
| Pages (from-to) | 503-536 |
| Number of pages | 34 |
| Journal | Econometrica |
| Volume | 75 |
| Issue number | 2 |
| DOIs | |
| State | Published - Mar 2007 |
| Externally published | Yes |
Keywords
- Anticipated utility
- Bundling
- Compound independence
- Maxmin expected utility
- Probabilistic sophistication
- Rank dependent utility
- Recursive utility
- Reduction of compound lotteries nonexpected utility
- Rule rationality
- Uncertainty aversion