The effects of endowment on the demand for probabilistic information
Research shows that individuals are ambiguity averse: they choose unambiguous over equivalent ambiguous prospects and price them higher (either as buyers or sellers). Moreover, it is often assumed that ambiguity averse individuals are willing to pay an ambiguity premium for information that reduces ambiguity [Camerer, C. F., & Weber, M. (1992). Recent developments in modeling preferences: Uncertainty and ambiguity. Journal of Risk and Uncertainty, 5(4), 325-370]. However, when people are asked to exchange an ambiguous alternative in their possession for an equivalent unambiguous one, they prefer to retain the former [Roca, M., Hogarth, R. M., & Maule, A. J. (2006). Ambiguity seeking as a result of the status quo bias. Journal of Risk and Uncertainty, 32(3), 175-194]. We present three experiments investigating the economic effects of endowment on attitudes towards ambiguity and the ambiguity premium. The experiments, based on a [Becker, G., DeGroot, M., & Marschak, J. (1964). Measuring utility by a single-response sequential method. Science, 9, 3] procedure, show that the value attributed to ambiguity reducing information is substantially affected by the status quo of the individual.
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Volume (Year): 109 (2009)
Issue (Month): 1 (May)
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- Mercè Roca & Robin Hogarth & A. Maule, 2006.
"Ambiguity seeking as a result of the status quo bias,"
Journal of Risk and Uncertainty,
Springer, vol. 32(3), pages 175-194, May.
- Mercè Roca & Robin Hogarth & A. John Maule, 2005. "Ambiguity seeking as a result of the status quo bias," Economics Working Papers 882, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2006.
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- Camerer, Colin & Weber, Martin, 1992. "Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-370, October.
- Heath, Chip & Tversky, Amos, 1991. "Preference and Belief: Ambiguity and Competence in Choice under Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 4(1), pages 5-28, January.
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- Eisenberger, Roselies & Weber, Martin, 1995. "Willingness-to-Pay and Willingness-to-Accept for Risky and Ambiguous Lotteries," Journal of Risk and Uncertainty, Springer, vol. 10(3), pages 223-233, May.
- Holt, Charles A, 1986. "Preference Reversals and the Independence Axiom," American Economic Review, American Economic Association, vol. 76(3), pages 508-515, June. Full references (including those not matched with items on IDEAS)
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