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Experimental evidence on valuation with multiple priors

Author

Listed:
  • Jianying Qiu

    () (Radboud University
    Nanjing University of Science and Technology)

  • Utz Weitzel

    (Radboud University
    Utrecht University)

Abstract

Abstract Popular models for decision making under ambiguity assume that people use not one but multiple priors. This paper is a first attempt to experimentally elicit the min and the max of multiple priors directly. In an ambiguous scenario we measure a participant’s single prior, her min and max of multiple priors, and the valuation of an ambiguous asset with the same underlying states as the ambiguous scenario. We use the min and the max of multiple priors to directly test two popular multiple priors models: the maxmin model and the α maxmin model. We find more support for the α maxmin model: although people put about twice the weight on the minimum of multiple priors, they also consider the maximum. Furthermore, we indirectly elicit confidence weights over the whole set of multiple priors and test two additional models: variational preferences and the smooth model of ambiguity. Two particular versions of the variational preferences model explain less than the α maxmin but more than the maxmin model. Overall, the smooth model of ambiguity performs best among all models tested.

Suggested Citation

  • Jianying Qiu & Utz Weitzel, 2016. "Experimental evidence on valuation with multiple priors," Journal of Risk and Uncertainty, Springer, vol. 53(1), pages 55-74, August.
  • Handle: RePEc:kap:jrisku:v:53:y:2016:i:1:d:10.1007_s11166-016-9244-9
    DOI: 10.1007/s11166-016-9244-9
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    References listed on IDEAS

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