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Does exposure to unawareness affect risk preferences? A preliminary result

Author

Listed:
  • Wenjun Ma

    () (Shenzhen University)

  • Burkhard C. Schipper

    () (University of California)

Abstract

Abstract One fundamental assumption often made in the literature on unawareness is that risk preferences are invariant to changes of awareness. We study how exposure to unawareness affects choices under risk. Participants in our experiment choose repeatedly between varying sure outcomes and a lottery in three phases. All treatments are exactly identical in phase 1 and phase 3, but differ in phase 2. There are five different treatments pertaining to the lottery faced in phase 2: The control treatment (i.e., a standard lottery), the treatment with awareness of unawareness of lottery outcomes but known number of outcomes, the treatment with awareness of unawareness of outcomes but with unknown number of outcomes, the treatment with unawareness of unawareness of some outcomes, and the treatment with an ambiguous lottery. We study both whether behavior differs in phase 3 across treatments (between subjects effect) and whether differences of subjects’ behavior between phases 1 and phase 3 differ across treatments (within subject effects). We observe no significant treatment effects.

Suggested Citation

  • Wenjun Ma & Burkhard C. Schipper, 2017. "Does exposure to unawareness affect risk preferences? A preliminary result," Theory and Decision, Springer, vol. 83(2), pages 245-257, August.
  • Handle: RePEc:kap:theord:v:83:y:2017:i:2:d:10.1007_s11238-017-9594-z
    DOI: 10.1007/s11238-017-9594-z
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    References listed on IDEAS

    as
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    Cited by:

    1. Karni, Edi & VierÃÿ, Marie-Louise, 2014. "Awareness of Unawareness: A Theory of Decision Making in the Face of Ignorance," Queen's Economics Department Working Papers 274647, Queen's University - Department of Economics.
    2. Karni, Edi & Vierø, Marie-Louise, 2017. "Awareness of unawareness: A theory of decision making in the face of ignorance," Journal of Economic Theory, Elsevier, vol. 168(C), pages 301-328.

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