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Unraveling Ambiguity Aversion

Author

Listed:
  • Ilke Aydogan

    (IESEG School of Management, Univ. Lille, CNRS, UMR 9221 - LEM - Lille Economie Management, F-59000 Lille, France, and iRisk Research Center on Risk and Uncertainty)

  • Loïc Berger

    (Univ. Lille, CNRS, IESEG School of Management, UMR 9221 - LEM - Lille Économie Management, Lille F-59000, France, iRisk Research Center on Risk and Uncertainty, CMCC Foundation – Euro-Mediterranean Center on Climate Change, Lecce, Italy
    RFF-CMCC European Institute on Economics and the Environment, Milan, Italy)

  • Valentina Bosetti

    (Bocconi University, MCC Foundation – Euro-Mediterranean Center on Climate Change, Lecce, Italy
    RFF-CMCC European Institute on Economics and the Environment, Milan, Italy)

Abstract

We report the results of two experiments designed to better understand the mechanisms driving decision making under ambiguity. We elicit individual preferences over different sources of uncertainty, entailing different degrees of complexity, from subjects with different sophistication levels. We show that (1) ambiguity aversion is robust to sophistication, but the strong relationship previously reported between attitudes toward ambiguity and compound risk is not and (2) Ellsberg ambiguity attitude can be partly explained by attitudes toward complexity for less sophisticated subjects only. Overall, regardless of the subject’s sophistication level, the main driver of Ellsberg ambiguity attitude is a specific treatment of unknown probabilities.

Suggested Citation

  • Ilke Aydogan & Loïc Berger & Valentina Bosetti, 2026. "Unraveling Ambiguity Aversion," The Review of Economics and Statistics, MIT Press, vol. 108(2), pages 533-541, March.
    • Handle: RePEc:tpr:restat:v:108:y:2026:i:2:p:533-541
    DOI: 10.1162/rest_a_01358
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