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The effect of elicitation methods on ambiguity aversion: an experimental investigation

Author

Listed:
  • Anna Maffioletti

    () (University of Turin)

  • Ulrich Schmidt

    () (University of Kiel & Kiel Institute for the World Economy)

  • Carsten Schröder

    () (University of Kiel)

Abstract

In this paper we elicit preferences for the classical three-color Ellsberg Paradax employing three different methods, choices, minimal selling prices and maximal buying prices. The resulting data reveal a high frequency of preference reversals which have not been analyzed before in choice under uncertainty. Moreover, we analyze the effect of elicitation methods on the degree of ambiguity aversion. While there is no apparent difference in the attitude towards ambiguity between selling and buying prices we observe a rather distinct pattern of behavior for choices: Compared to choices, eliciting preferences by pricing tasks decreases the number of subjects being ambiguity averse in both tasks and increases the number of subjects being ambiguity neutral or prone. We argue that this difference between pricing and choice supports the hypothesis of comparative ignorance.

Suggested Citation

  • Anna Maffioletti & Ulrich Schmidt & Carsten Schröder, 2009. "The effect of elicitation methods on ambiguity aversion: an experimental investigation," Economics Bulletin, AccessEcon, vol. 29(2), pages 638-643.
  • Handle: RePEc:ebl:ecbull:eb-09-00077
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    References listed on IDEAS

    as
    1. Craig R. Fox & Amos Tversky, 1995. "Ambiguity Aversion and Comparative Ignorance," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 585-603.
    2. Tversky, Amos & Slovic, Paul & Kahneman, Daniel, 1990. "The Causes of Preference Reversal," American Economic Review, American Economic Association, vol. 80(1), pages 204-217, March.
    3. Hogarth, Robin M & Kunreuther, Howard, 1989. "Risk, Ambiguity, and Insurance," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 5-35, April.
    4. Camerer, Colin & Kunreuther, Howard, 1989. "Experimental Markets for Insurance," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 265-299, September.
    5. Ulrich Schmidt & John D. Hey, 2004. "Are Preference Reversals Errors? An Experimental Investigation," Journal of Risk and Uncertainty, Springer, vol. 29(3), pages 207-218, December.
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    Citations

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    Cited by:

    1. Johanna Etner & Meglena Jeleva & Jean-Marc Tallon, 2009. "Decision theory under uncertainty," Post-Print halshs-00429573, HAL.
    2. Sinitskaya, Ekaterina, 2014. "Computational modeling of an economy using elements of artificial intelligence," ISU General Staff Papers 201401010800005291, Iowa State University, Department of Economics.
    3. Jonathan E. Alevy, 2011. "Ambiguity in Individual Choice and Market Environments: On the Importance of Comparative Ignorance," Working Papers 2011-04, University of Alaska Anchorage, Department of Economics.

    More about this item

    Keywords

    Ellsberg Paradox; ambiguity aversion; preference reversal; comparative ignorance;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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