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Ambiguity Attitudes in a Large Representative Sample

Author

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  • Stephen G. Dimmock

    (Nanyang Business School, Nanyang Technological University, Singapore 639798)

  • Roy Kouwenberg

    (College of Management, Mahidol University, Bangkok 10400, Thailand; and Erasmus School of Economics, Erasmus University Rotterdam, 3000 DR Rotterdam, Netherlands)

  • Peter P. Wakker

    (Erasmus School of Economics, Erasmus University Rotterdam, 3000 DR Rotterdam, Netherlands)

Abstract

Using a theorem showing that matching probabilities of ambiguous events can capture ambiguity attitudes, we introduce a tractable method for measuring ambiguity attitudes and apply it in a large representative sample. In addition to ambiguity aversion, we confirm an ambiguity component recently found in laboratory studies: a-insensitivity, the tendency to treat subjective likelihoods as 50-50, thus overweighting extreme events. Our ambiguity measurements are associated with real economic decisions; specifically, a-insensitivity is negatively related to stock market participation. Ambiguity aversion is also negatively related to stock market participation, but only for subjects who perceive stock returns as highly ambiguous. This paper was accepted by James Smith, decision analysis .

Suggested Citation

  • Stephen G. Dimmock & Roy Kouwenberg & Peter P. Wakker, 2016. "Ambiguity Attitudes in a Large Representative Sample," Management Science, INFORMS, vol. 62(5), pages 1363-1380, May.
    • Handle: RePEc:inm:ormnsc:v:62:y:2016:i:5:p:1363-1380
    DOI: 10.1287/mnsc.2015.2198
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