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Attitudes towards Uncertainty and Randomization: An Experimental Study

  • Dominiak, Adam
  • Schnedler, Wendelin

Individuals exhibit a randomization preference if they prefer random mixtures of two bets to each of the involved bets. Such preferences provide the foundation of various models of uncertainty aversion. However, it has to our knowledge not been empirically investigated whether uncertainty-averse decision makers indeed exhibit such preferences. Here, we examine the relationship experimentally. We find that uncertainty aversion is not positively associated with randomization preferences. Moreover, we observe choices that are not consistent with the prevailing theories of uncertainty aversion: a non-negligible number of uncertain-averse subjects seem to dislike randomization.

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Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0494.

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Date of creation: 07 Jan 2010
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Handle: RePEc:awi:wpaper:0494
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