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Does Exposure to Unawareness Affect Risk Preferences? A Preliminary Result

Author

Listed:
  • Wenjun Ma
  • Burkhard Schipper

    (Department of Economics, University of California Davis)

Abstract

One fundamental assumption often made in the literature on unawareness is that risk preferences are invariant to changes of awareness. We study how exposure to unawareness a ects choices under risk. Participants in our experiment choose repeatedly between varying sure outcomes and a lottery in 3 phases. All treatments are exactly identical in phase 1 and phase 3, but di er in phase 2. There are ve di erent treatments pertaining to the lottery faced in phase 2: The control treatment (i.e., a standard lottery), the treatment with awareness of unawareness of lottery outcomes but known number of outcomes, the treatment with awareness of unawareness of outcomes but with unknown number of outcomes, the treatment with unawareness of unawareness of some outcomes, and the treatment with an ambiguous lottery. We study both whether behavior di ers in phase 3 across treatments (between subjects e ect) and whether di erences of subjects' behavior between phases 1 and phase 3 di ers across treatments (within subject e ects). We observe no signi cant treatment e ects.

Suggested Citation

  • Wenjun Ma & Burkhard Schipper, 2016. "Does Exposure to Unawareness Affect Risk Preferences? A Preliminary Result," Working Papers 162, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:16-2
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    File URL: http://wp.econ.ucdavis.edu/16-2.pdf
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    References listed on IDEAS

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    1. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2013. "Dynamic unawareness and rationalizable behavior," Games and Economic Behavior, Elsevier, vol. 81(C), pages 50-68.
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    Cited by:

    1. Karni, Edi & Vierø, Marie-Louise, 2017. "Awareness of unawareness: A theory of decision making in the face of ignorance," Journal of Economic Theory, Elsevier, vol. 168(C), pages 301-328.
    2. Karni, Edi & VierÃÿ, Marie-Louise, 2014. "Awareness of Unawareness: A Theory of Decision Making in the Face of Ignorance," Queen's Economics Department Working Papers 274647, Queen's University - Department of Economics.

    More about this item

    Keywords

    Unawareness; Awareness of unawareness; Risk aversion; Experiments.;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics

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