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The Role of Probability Interval and Emotional Parameters

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  • Robert M. Feinberg
  • Mahmud Yesuf

Abstract

We study risk and ambiguity aversion among experimental subjects, focusing on understanding the role of the degree of ambiguity (as measured by the probability interval) and selected emotional parameters on attitudes towards ambiguity. In contrast to the general findings in the literature that people usually tend to take gambles with known probability over equivalent gambles with ambiguous probability, we find that student subjects are ambiguity neutral when faced with a relatively narrow probability interval but ambiguity averse in relatively wider intervals. We also find that less trusting and more pessimistic individuals tend to avoid ambiguity, while a measure of subject happiness has no impact on ambiguity aversion. JEL classification:

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File URL: http://www.american.edu/cas/economics/research/upload/2013-11.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by American University, Department of Economics in its series Working Papers with number 2013-11.

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Date of creation: Jul 2013
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Handle: RePEc:amu:wpaper:2013-11

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Web page: http://www.american.edu/cas/economics/

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  1. Fox, Craig R & Tversky, Amos, 1995. "Ambiguity Aversion and Comparative Ignorance," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 585-603, August.
  2. Dalton, Timothy J. & Yesuf, Mahmud & Muhammad, Lutta, 2011. "Demand for Drought Tolerance in Africa: Selection of Drought Tolerant Maize Seed using Framed Field Experiments," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103712, Agricultural and Applied Economics Association.
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