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A Randomness Device to Create the Conditions of Uncertainty

Author

Listed:
  • Loïc Berger

    (IÉSEG School Of Management [Puteaux], EIEE - European Institute on Economics and the Environment, CMCC - Centro Euro-Mediterraneo per i Cambiamenti Climatici [Bologna], LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

Abstract

The experimental study of decision-making under uncertainty typically builds on Ellsberg's (1961) setting. Yet, as the total number of balls is known in standard Ellsberg's urns, an implicit constraint is put on the specification of the probability models to consider. In practice, this restricts the ability of Ellsberg's urns to characterize situations going beyond those of model ambiguity. In this note, I present a simple and easy-to-implement device that creates the initial conditions of uncertainty, which constitute a critical prerequisite for the study of model misspecification.

Suggested Citation

  • Loïc Berger, 2023. "A Randomness Device to Create the Conditions of Uncertainty," Working Papers hal-04071230, HAL.
    • Handle: RePEc:hal:wpaper:hal-04071230
    Note: View the original document on HAL open archive server: https://hal.science/hal-04071230v2
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    File URL: https://hal.science/hal-04071230v2/document
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    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 2013. "Uncertainty Outside and Inside Economic Models," Nobel Prize in Economics documents 2013-7, Nobel Prize Committee.
    2. Ilke AYDOGAN & Loïc BERGER & Valentina BOSETTI & Ning LIU, 2022. "Three layers of uncertainty," Working Papers 2022-iRisk-01, IESEG School of Management.
    3. Ilke Aydogan & Loïc Berger & Valentina Bosetti & Ning Liu, 2022. "Three layers of uncertainty," Working Papers hal-03031751, HAL.
    4. Lars Peter Hansen, 2014. "Nobel Lecture: Uncertainty Outside and Inside Economic Models," Journal of Political Economy, University of Chicago Press, vol. 122(5), pages 945-987.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Ambiguity aversion; experiment; Ellsberg paradox; model uncertainty;
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