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Generating Ambiguity in the Laboratory

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Author Info

  • Jack Stecher

    ()
    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Timothy Shields

    ()
    (George L. Argyros School of Business and Economics, Chapman University, Orange, California 92866)

  • John Dickhaut (deceased)

    (Formerly at George L. Argyros School of Business and Economics, Chapman University, Orange, California 92866)

Abstract

This article develops a method for drawing samples from a distribution with no finite quantiles or moments. The method provides researchers with a way to give subjects the experience of ambiguity. In any experiment, learning the distribution from experience is impossible for the subjects, essentially because it is impossible for the experimenter. We characterize our method, illustrate it in simulations, and then test it in a laboratory experiment. Our method does not withhold sampling information, does not assume that the subject is incapable of making statistical inferences, is replicable across experiments, and requires no special apparatus. We compare our method to the techniques used in related experiments that attempt to produce an ambiguous experience for the subjects. This paper was accepted by Peter Wakker, decision analysis.

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File URL: http://dx.doi.org/10.1287/mnsc.1100.1307
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 57 (2011)
Issue (Month): 4 (April)
Pages: 705-712

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Handle: RePEc:inm:ormnsc:v:57:y:2011:i:4:p:705-712

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Related research

Keywords: ambiguity; Ellsberg; Knightian uncertainty; laboratory experiments; decision analysis; theory;

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Cited by:
  1. Yang, Chun-Lei & Yao, Lan, 2011. "Ellsberg Paradox and Second-order Preference Theories on Ambiguity: Some New Experimental Evidence," MPRA Paper 28531, University Library of Munich, Germany.
  2. Takashi Hayashi & Ryoko Wada, 2010. "Choice with imprecise information: an experimental approach," Theory and Decision, Springer, vol. 69(3), pages 355-373, September.
  3. Jack Stecher & Radhika Lunawat & Kira Pronin & John Dickhaut, 2007. "Decision Making and Trade without Probabilities," CIRANO Working Papers 2007s-21, CIRANO.

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