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Generating Ambiguity in the Laboratory

  • Jack Stecher

    ()

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Timothy Shields

    ()

    (George L. Argyros School of Business and Economics, Chapman University, Orange, California 92866)

  • John Dickhaut (deceased)

    (Formerly at George L. Argyros School of Business and Economics, Chapman University, Orange, California 92866)

This article develops a method for drawing samples from a distribution with no finite quantiles or moments. The method provides researchers with a way to give subjects the experience of ambiguity. In any experiment, learning the distribution from experience is impossible for the subjects, essentially because it is impossible for the experimenter. We characterize our method, illustrate it in simulations, and then test it in a laboratory experiment. Our method does not withhold sampling information, does not assume that the subject is incapable of making statistical inferences, is replicable across experiments, and requires no special apparatus. We compare our method to the techniques used in related experiments that attempt to produce an ambiguous experience for the subjects. This paper was accepted by Peter Wakker, decision analysis.

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File URL: http://dx.doi.org/10.1287/mnsc.1100.1307
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 57 (2011)
Issue (Month): 4 (April)
Pages: 705-712

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Handle: RePEc:inm:ormnsc:v:57:y:2011:i:4:p:705-712
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  1. Mohammed Abdellaoui & Aurelien Baillon & Laetitia Placido & Peter P. Wakker, 2011. "The Rich Domain of Uncertainty: Source Functions and Their Experimental Implementation," American Economic Review, American Economic Association, vol. 101(2), pages 695-723, April.
  2. repec:hal:journl:hal-00609214 is not listed on IDEAS
  3. Scheinkman, Jose A & LeBaron, Blake, 1989. "Nonlinear Dynamics and Stock Returns," The Journal of Business, University of Chicago Press, vol. 62(3), pages 311-37, July.
  4. Yoram Halevy, 2007. "Ellsberg Revisited: An Experimental Study," Econometrica, Econometric Society, vol. 75(2), pages 503-536, 03.
  5. 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.
  6. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  7. Takashi Hayashi & Ryoko Wada, 2010. "Choice with imprecise information: an experimental approach," Theory and Decision, Springer, vol. 69(3), pages 355-373, September.
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