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Are Policymakers Ambiguity Averse?

Author

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  • Loïc Berger
  • Valentina Bosetti

Abstract

We investigate the ambiguity preferences of a unique sample of real-life policymakers at the Paris UN climate conference (COP21). We find that policymakers are generally ambiguity averse. Using a simple design, we are moreover able to show that these preferences are not necessarily due to an irrational behaviour, but rather to intrinsic preferences over unknown probabilities. Exploring the heterogeneity within our sample, we also show that the country of origin and the degree of quantitative sophistication affect policymakers' attitudes towards compound risk, but not towards ambiguity. Robustness results are obtained in a lab experiment with a sample of university students.

Suggested Citation

  • Loïc Berger & Valentina Bosetti, 2020. "Are Policymakers Ambiguity Averse?," The Economic Journal, Royal Economic Society, vol. 130(626), pages 331-355.
    • Handle: RePEc:oup:econjl:v:130:y:2020:i:626:p:331-355.
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    File URL: http://hdl.handle.net/10.1093/ej/uez051
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    Cited by:

    1. Ilke Aydogan & Loïc Berger & Valentina Bosetti & Ning Liu, 2023. "Three Layers of Uncertainty," Journal of the European Economic Association, European Economic Association, vol. 21(5), pages 2209-2236.
    2. Ilke Aydogan & Loïc Berger & Valentina Bosetti, 2023. "Unraveling Ambiguity Aversion," Post-Print hal-04370668, HAL.
    3. repec:hal:journl:hal-03031751 is not listed on IDEAS
    4. Pablo Brañas-Garza & Antonio Cabrales & Maria Paz Espinosa & Diego Jorrat, 2022. "The Effect of Ambiguity in Strategic Environments: an Experiment," Working Papers 196, Red Nacional de Investigadores en Economía (RedNIE).
    5. Marinacci Massimo & Principi Giulio & Stanca Lorenzo, 2023. "Recursive Preferences and Ambiguity Attitudes," Working papers 082, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    6. Li, Jiangyan & Fairley, Kim & Fenneman, Achiel, 2024. "Does it matter how we produce ambiguity in experiments?," MPRA Paper 122336, University Library of Munich, Germany.
    7. Loïc Berger & Massimo Marinacci, 2020. "Model Uncertainty in Climate Change Economics: A Review and Proposed Framework for Future Research," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(3), pages 475-501, November.
    8. Wang, Jiarui & Liu, Shancun & Yang, Haijun, 2022. "Institutional investor’ proportions and inactive trading," International Review of Financial Analysis, Elsevier, vol. 82(C).
    9. repec:hal:wpaper:hal-04071242 is not listed on IDEAS
    10. Massimo Marinacci & Giulio Principi & Lorenzo Stanca, 2023. "Recursive Preferences and Ambiguity Attitudes," Carlo Alberto Notebooks 695 JEL Classification: C, Collegio Carlo Alberto.
    11. Keyu Wu & Ernst Fehr & Sean Hofland & Martin Schonger, 2024. "On the Psychological Foundations of Ambiguity and Compound Risk Aversion," CESifo Working Paper Series 11150, CESifo.
    12. Stan Olijslagers & Sweder Wijnbergen, 2024. "Discounting the Future: On Climate Change, Ambiguity Aversion and Epstein–Zin Preferences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(3), pages 683-730, March.
    13. Massimo Marinacci & Giulio Principi & Lorenzo Stanca, 2023. "Recursive Preferences and Ambiguity Attitudes," Papers 2304.06830, arXiv.org, revised Jan 2026.

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