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Ambiguity aversion in the long run: Repeated decisions under risk and uncertainty

  • Liu, Hsin-Hsien
  • Colman, Andrew M.
Registered author(s):

    In two experiments, decision makers chose between risky and ambiguous gambles under conditions of both single (unrepeated) and multiply repeated choices. The gambles were presented either as modified Ellsberg urn choices or as marketing strategy decisions. In both experiments, decision makers chose the ambiguous options more frequently in the repeated-choice than the single-choice conditions. More decision makers made risky single choices and ambiguous repeated choices than ambiguous single choices and risky repeated choices. Decision makers expressed more self-rated confidence in their repeated than their single ambiguous choices. These findings are interpreted in the light of findings on repeated decision making under risk and theories of loss aversion and ambiguity aversion.

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    File URL: http://www.sciencedirect.com/science/article/B6V8H-4VNH3N9-1/2/babb3ff9941cdbffe09260ef0e0ecd04
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    Article provided by Elsevier in its journal Journal of Economic Psychology.

    Volume (Year): 30 (2009)
    Issue (Month): 3 (June)
    Pages: 277-284

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    Handle: RePEc:eee:joepsy:v:30:y:2009:i:3:p:277-284
    Contact details of provider: Web page: http://www.elsevier.com/locate/joep

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    1. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
    2. Einhorn, Hillel J & Hogarth, Robin M, 1986. "Decision Making under Ambiguity," The Journal of Business, University of Chicago Press, vol. 59(4), pages S225-50, October.
    3. Shlomo Benartzi & Richard H. Thaler, 1993. "Myopic Loss Aversion and the Equity Premium Puzzle," NBER Working Papers 4369, National Bureau of Economic Research, Inc.
    4. 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.
    5. Shlomo Benartzi & Richard H. Thaler, 1999. "Risk Aversion or Myopia? Choices in Repeated Gambles and Retirement Investments," Management Science, INFORMS, vol. 45(3), pages 364-381, March.
    6. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
    7. Thaler, Richard H, et al, 1997. "The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 647-61, May.
    8. Lopes, Lola L., 1996. "When Time Is of the Essence: Averaging, Aspiration, and the Short Run," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 179-189, March.
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