Volume 60, Numbers 2-3, 257-282, DOI: 10.1007/s11238-005-4573-1

An Experimental Test of Generalized Ambiguity Aversion using Lottery Pricing Tasks

Michael Bleaney and Steven J. Humphrey

From the issue entitled "Models and Experiments in Decision Making under Uncertainty and over Time, Selection of Papers from FUR XI Conference, Paris – Cachan, 2004"

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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.

Keywords  ambiguity - probability learning - competence and comprehension hypotheses - experiment - lottery valuations

Jel classification  D81 - C91

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