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Heterogeneity of Ambiguity Preferences

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  • Dale O. Stah

    (University of Texas at Austin)

Abstract

There is much interest in ambiguity-averse behavior under uncertainty, and many theories have been advanced to explain this. Empirical analyses of choices involving ambiguous options have typically used a representative agent model. We address the question of whether representative agent models are accurate approximations of reality or whether there is substantial heterogeneity in ambiguity preferences. In contrast to the representative agent model, we find that the vast majority of participants are not significantly ambiguity averse and that a significant proportion of participants are consistent with expected utility theory. This finding has important implications for the application of behavioral economics. © 2014 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Dale O. Stah, 2014. "Heterogeneity of Ambiguity Preferences," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 609-617, October.
    • Handle: RePEc:tpr:restat:v:96:y:2014:i:4:p:609-617
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00392
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    More about this item

    Keywords

    heterogeneity; ambiguity; behavior; behavioral economics; representative agent model;
    All these keywords.

    JEL classification:

    • P49 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Other

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