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Betting on Machina's reflection example: an experiment on ambiguity

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  • L’Haridon, Olivier
  • Placido, Lætitia

Abstract

In a recent paper, Machina (2008) suggested choice problems in the spirit of Ellsberg (1961) which challenge tail-separability, an implication of Choquet Expected Utility (CEU) to a similar extent as the Ellsberg paradox challenged the sure-thing principle implied by Subjective Expected Utility (SEU). We have tested choice behavior for bets on one of Machina’s choice problems, the reflection example. Our results indicate that tail-separability is violated by a large majority of subjects (over 70% of the sample). These empirical findings complement the theoretical analysis of Machina (2008) and, together, they confirm the need for new approaches in the analysis of ambiguity for decision making.

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Bibliographic Info

Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 909.

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Length: 25 pages
Date of creation: 01 Oct 2008
Date of revision:
Handle: RePEc:ebg:heccah:0909

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Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
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Keywords: ambiguity; Choquet expected utility; experimental economics;

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References

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Citations

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Cited by:
  1. Aurelien Baillon & Olivier L'Haridon & Laetitia Placido, 2011. "Ambiguity Models and the Machina Paradoxes," American Economic Review, American Economic Association, vol. 101(4), pages 1547-60, June.
  2. Nascimento, Leandro, 2012. "The ex-ante aggregation of opinions under uncertainty," Theoretical Economics, Econometric Society, vol. 7(3), September.
  3. Kemel, Emmanuel & Paraschiv, Corina, 2013. "Prospect Theory for joint time and money consequences in risk and ambiguity," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 81-95.
  4. Ehud Lehrer & Roee Tepper, 2013. "Concave Expected Utility and Event Separability," Levine's Working Paper Archive 786969000000000809, David K. Levine.
  5. Blavatskyy, Pavlo R., 2013. "Two examples of ambiguity aversion," Economics Letters, Elsevier, vol. 118(1), pages 206-208.

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