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A Test of Mechanical Ambiguity

  • Oechssler, Jörg
  • Roomets, Alex

We implement an experiment to elicit subjects’ ambiguity attitudes in the spirit of Ellsberg’s three-color urn. The procedure includes three design elements that (together) have not been featured in similar experiments: Strict ambiguity preferences, a single decision, and a mechanical randomization device with an unknown distribution (to both subjects and experimenters). We use this device in order to eliminate possible ‘strategic’ ambiguity related to subjects’ beliefs about the experimenters’ motivations. In addition, we survey 40 experimental studies on Ellsberg’s two- and three-color problems, and find that, on average, slightly more than half of subjects are classified as ambiguity averse. Our results, with our new design, fall on the low end of the range of results in the surveyed studies, and are comparable to a control test where “strategic” ambiguity was induced.

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Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0555.

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Date of creation: 21 Mar 2014
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Handle: RePEc:awi:wpaper:0555
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  1. David Johnson & David Cooper, 2014. "Ambiguity in Performance Pay: An Online Experiment," Working Papers 2014-83, Department of Economics, University of Calgary, revised 10 Nov 2014.
  2. Robert S. Gazzale & Julian Jamison & Alexander Karlan & Dean S. Karlan, 2009. "Ambiguous Solicitation: Ambiguous Prescription," Department of Economics Working Papers 2009-02, Department of Economics, Williams College.
  3. Jeffrey V. Butler & Luigi Guiso & Tullio Jappelli, 2011. "The role of intuition and reasoning in driving aversion to risk and ambiguity," EIEF Working Papers Series 1107, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2011.
  4. Dominiak, Adam & Dürsch, Peter & Lefort, Jean-Philippe, 2012. "A dynamic Ellsberg urn experiment," Economics Papers from University Paris Dauphine 123456789/7333, Paris Dauphine University.
  5. Camerer, Colin & Weber, Martin, 1992. " Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-70, October.
  6. Jeffrey V. Butler & Luigi Guiso & Tullio Jappelli, 2013. "Manipulating Reliance on Intuition Reduces Risk and Ambiguity Aversion," CSEF Working Papers 327, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  7. Dominiak, Adam & Schnedler, Wendelin, 2010. "Attitudes towards Uncertainty and Randomization: An Experimental Study," Working Papers 0494, University of Heidelberg, Department of Economics.
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  9. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  10. Trautmann, Stefan T. & Zeckhauser, Richard J., 2013. "Shunning uncertainty: The neglect of learning opportunities," Games and Economic Behavior, Elsevier, vol. 79(C), pages 44-55.
  11. Gary Charness & Edi Karni & Dan Levin, 2013. "Ambiguity attitudes and social interactions: An experimental investigation," Journal of Risk and Uncertainty, Springer, vol. 46(1), pages 1-25, February.
  12. John D Hey & Gianna Lotito & Anna Maffioletti, 2008. "The Descriptive and Predictive Adequacy of Theories of Decision Making Under Uncertainty/Ambiguity," Discussion Papers 08/04, Department of Economics, University of York.
  13. Stefan T. Trautmann & Ferdinand M. Vieider & Peter P. Wakker, 2011. "Preference Reversals for Ambiguity Aversion," Management Science, INFORMS, vol. 57(7), pages 1320-1333, July.
  14. Eichberger, Jürgen & Oechssler, Jörg & Schnedler, Wendelin, 2012. "How do people cope with an ambiguous situation when it becomes even more ambiguous?," Working Papers 0528, University of Heidelberg, Department of Economics.
  15. repec:clg:wpaper:2013-27 is not listed on IDEAS
  16. Michèle Cohen & Jean-Marc Tallon & Jean-Christophe Vergnaud, 2009. "An experimental investigation of imprecision attitude and its relation with risk attitude and impatience," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00389674, HAL.
  17. Anna Maffioletti & Michele Santoni, 2001. "Do trade union leaders violate subjective expected utility? Some insight from experimental data," Departmental Working Papers 2001-15, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  18. Einhorn, Hillel J & Hogarth, Robin M, 1986. "Decision Making under Ambiguity," The Journal of Business, University of Chicago Press, vol. 59(4), pages S225-50, October.
  19. Mohammed Abdellaoui & Aurelien Baillon & Laetitia Placido & Peter P. Wakker, 2011. "The Rich Domain of Uncertainty: Source Functions and Their Experimental Implementation," American Economic Review, American Economic Association, vol. 101(2), pages 695-723, April.
  20. Akay, Alpaslan & Martinsson, Peter & Medhin, Haileselassie & Trautmann, Stefan, 2010. "Attitudes Toward Uncertainty Among the Poor: Evidence from Rural Ethiopia," Discussion Papers dp-10-04-efd, Resources For the Future.
  21. Alpaslan Akay & Peter Martinsson & Haileselassie Medhin & Stefan Trautmann, 2012. "Attitudes toward uncertainty among the poor: an experiment in rural Ethiopia," Theory and Decision, Springer, vol. 73(3), pages 453-464, September.
  22. Fox, Craig R & Tversky, Amos, 1995. "Ambiguity Aversion and Comparative Ignorance," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 585-603, August.
  23. Vinogradov, Dmitri & Shadrina, Elena, 2013. "Non-monetary incentives in online experiments," Economics Letters, Elsevier, vol. 119(3), pages 306-310.
  24. repec:clg:wpaper:2013-21 is not listed on IDEAS
  25. Yoram Halevy, 2007. "Ellsberg Revisited: An Experimental Study," Econometrica, Econometric Society, vol. 75(2), pages 503-536, 03.
  26. Füllbrunn, Sascha & Rau, Holger & Weitzel, Utz, 2013. "Do ambiguity effects survive in experimental asset markets?," MPRA Paper 44700, University Library of Munich, Germany.
  27. Soo Chew & Richard Ebstein & Songfa Zhong, 2012. "Ambiguity aversion and familiarity bias: Evidence from behavioral and gene association studies," Journal of Risk and Uncertainty, Springer, vol. 44(1), pages 1-18, February.
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