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Betting on Machina’s reflection example: an experiment on ambiguity

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Listed author(s):
  • Olivier L’Haridon

    ()

  • Lætitia Placido

    ()

Abstract

In a recent article, Machina (Am Econ Rev forthcoming, 2008) suggested choice problems in the spirit of Ellsberg (Q J Econ 75:643-669, 1961), which challenge tail-separability, an implication of Choquet expected utility (CEU), to a similar extent as the Ellsberg paradox challenged the sure-thing principle implied by subjective expected utility (SEU). We have tested choice behavior for bets on one of Machina's choice problems, the reflection example. Our results indicate that tail-separability is violated by a large majority of subjects (over 70% of the sample). These empirical findings complement the theoretical analysis of Machina (Am Econ Rev forthcoming, 2008) and, together, they confirm the need for new approaches in the analysis of ambiguity for decision making.

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File URL: http://hdl.handle.net/10.1007/s11238-008-9128-9
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Article provided by Springer in its journal Theory and Decision.

Volume (Year): 69 (2010)
Issue (Month): 3 (September)
Pages: 375-393

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Handle: RePEc:kap:theord:v:69:y:2010:i:3:p:375-393
DOI: 10.1007/s11238-008-9128-9
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/economic+theory/journal/11238/PS2

Keywords: Ambiguity; Choquet expected utility; Experimental economics; C90; D81;

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Find related papers by JEL classification:
  • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
  • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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Cited by:

  1. Nascimento, Leandro, 2012. "The ex-ante aggregation of opinions under uncertainty," Theoretical Economics, Econometric Society, vol. 7(3), September.
  2. Roee Teper, 2015. "Subjective Independence and Concave Expected Utility," Working Paper 5865, Department of Economics, University of Pittsburgh.
  3. Laurent Denant-Boemont & Olivier L’Haridon, 2013. "La rationalité à l'épreuve de l'économie comportementale," Revue française d'économie, Presses de Sciences-Po, vol. 0(2), pages 35-89.
  4. Kemel, Emmanuel & Paraschiv, Corina, 2013. "Prospect Theory for joint time and money consequences in risk and ambiguity," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 81-95.
  5. Aurelien Baillon & Olivier L'Haridon & Laetitia Placido, 2011. "Ambiguity Models and the Machina Paradoxes," American Economic Review, American Economic Association, vol. 101(4), pages 1547-1560, June.
  6. Ehud Lehrer & Roee Tepper, 2013. "Concave Expected Utility and Event Separability," Levine's Working Paper Archive 786969000000000809, David K. Levine.
  7. Diederik Aerts & Emmanuel Haven & Sandro Sozzo, 2016. "A Proposal to Extend Expected Utility in a Quantum Probabilistic Framework," Papers 1612.08583, arXiv.org.
  8. Blavatskyy, Pavlo R., 2013. "Two examples of ambiguity aversion," Economics Letters, Elsevier, vol. 118(1), pages 206-208.
  9. Haven, Emmanuel & Sozzo, Sandro, 2016. "A generalized probability framework to model economic agents' decisions under uncertainty," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 297-303.
  10. Abhinash Borah & Christopher Kops, 2016. "The Anscombe–Aumann representation and the independence axiom: a reconsideration," Theory and Decision, Springer, vol. 80(2), pages 211-226, February.
  11. Chen, Daniel L. & Schonger, Martin, 2016. "Testing axiomatizations of ambiguity aversion," IAST Working Papers 16-61, Institute for Advanced Study in Toulouse (IAST).

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