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

Author

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  • 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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Suggested Citation

  • Olivier L’Haridon & Lætitia Placido, 2010. "Betting on Machina’s reflection example: an experiment on ambiguity," Theory and Decision, Springer, vol. 69(3), pages 375-393, September.
    • Handle: RePEc:kap:theord:v:69:y:2010:i:3:p:375-393
    DOI: 10.1007/s11238-008-9128-9
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    More about this item

    Keywords

    Ambiguity; Choquet expected utility; Experimental economics; C90; D81;
    All these keywords.

    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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