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Manipulating Reliance on Intuition Reduces Risk and Ambiguity Aversion

  • Butler, Jeff
  • Guiso, Luigi
  • Jappelli, Tullio

Prior research suggests that those who rely on intuition rather than effortful reasoning when making decisions are less averse to risk and ambiguity. The evidence is largely correlational, however, leaving open the question of the direction of causality. In this paper, we present experimental evidence of causation running from reliance on intuition to risk and ambiguity preferences. We directly manipulate participants’ predilection to rely on intuition and find that enhancing reliance on intuition lowers the probability of being ambiguity averse by 30 percentage points and increases risk tolerance by about 30 percent in the experimental sub‐ population where we would a priori expect the manipulation to be successful (males).

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9461.

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Date of creation: May 2013
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Handle: RePEc:cpr:ceprdp:9461
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  1. 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.
  2. Leonard Lee & On Amir & Dan Ariely, 2009. "In Search of Homo Economicus: Cognitive Noise and the Role of Emotion in Preference Consistency," Journal of Consumer Research, University of Chicago Press, vol. 36(2), pages 173 - 187.
  3. Michel Tuan Pham & Leonard Lee & Andrew T. Stephen, 2012. "Feeling the Future: The Emotional Oracle Effect," Journal of Consumer Research, University of Chicago Press, vol. 39(3), pages 461 - 477.
  4. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
  5. Charles R. Plott & Kathryn Zeiler, 2005. "The Willingness to Pay–Willingness to Accept Gap, the "Endowment Effect," Subject Misconceptions, and Experimental Procedures for Eliciting Valuations," American Economic Review, American Economic Association, vol. 95(3), pages 530-545, June.
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