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Intertemporal stability of ambiguity preferences

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  • Duersch, Peter
  • Römer, Daniel
  • Roth, Benjamin

Abstract

To make predictions with theories, usually we assume an individual's characteristics such as uncertainty preferences to be stable over time. In this paper, we analyze the stability of ambiguity preferences experimentally. We repeatedly elicit ambiguity attitudes towards multiple 3-color Ellsberg urns over a period of two months. In our data, 57% of the choices are consistent with stable preferences over the time of observation. This share is significantly higher than random choices would suggest, but significantly lower than the level of consistency in a control treatment without a time lag (71%). Interestingly, for subjects who are able to recall their decision after two months correctly, the share of consistent choices does not drop significantly over time.

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Bibliographic Info

Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0548.

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Date of creation: 13 Aug 2013
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Handle: RePEc:awi:wpaper:0548

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Related research

Keywords: ambiguity; stability of preferences; experiment;

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  1. Carmela Di Mauro & Anna Maffioletti, 2004. "Attitudes to risk and attitudes to uncertainty: experimental evidence," Applied Economics, Taylor & Francis Journals, vol. 36(4), pages 357-372.
  2. Manel Baucells & Antonio Villasís, 2010. "Stability of risk preferences and the reflection effect of prospect theory," Theory and Decision, Springer, vol. 68(1), pages 193-211, February.
  3. Charles Noussair & Ping Wu, 2006. "Risk tolerance in the present and the future: an experimental study," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(6), pages 401-412.
  4. Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
  5. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutström, 2005. "Temporal stability of estimates of risk aversion," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(1), pages 31-35, January.
  6. Sujoy Chakravarty & Jaideep Roy, 2009. "Recursive expected utility and the separation of attitudes towards risk and ambiguity: an experimental study," Theory and Decision, Springer, vol. 66(3), pages 199-228, March.
  7. Camerer, Colin & Weber, Martin, 1992. " Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-70, October.
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