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Manipulating Reliance on Intuition Reduces Risk and Ambiguity Aversion

Author

Listed:
  • Jeffrey V. Butler

    (EIEF)

  • Luigi Guiso

    (EIEF)

  • Tullio Jappelli

    (University of Naples "Federico II" and CSEF)

Abstract

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 subpopulation where we would a priori expect the manipulation to be successful (males).

Suggested Citation

  • Jeffrey V. Butler & Luigi Guiso & Tullio Jappelli, 2013. "Manipulating Reliance on Intuition Reduces Risk and Ambiguity Aversion," EIEF Working Papers Series 1301, Einaudi Institute for Economics and Finance (EIEF), revised Jan 2013.
  • Handle: RePEc:eie:wpaper:1301
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    References listed on IDEAS

    as
    1. Jeffrey Butler & Luigi Guiso & Tullio Jappelli, 2014. "The role of intuition and reasoning in driving aversion to risk and ambiguity," Theory and Decision, Springer, vol. 77(4), pages 455-484, December.
    2. 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.
    3. Michel Tuan Pham & Leonard Lee & Andrew T. Stephen, 2012. "Feeling the Future: The Emotional Oracle Effect," Journal of Consumer Research, Oxford University Press, vol. 39(3), pages 461-477.
    4. 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, Oxford University Press, vol. 36(2), pages 173-187.
    5. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Luigi Guiso, 2015. "A Test of Narrow Framing and its Origin," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 1(1), pages 61-100, March.
    2. repec:eee:joepsy:v:65:y:2018:i:c:p:90-107 is not listed on IDEAS
    3. Ennio Bilancini & Leonardo Boncinelli & Luigi Luini, 2017. "Does Focality Depend on the Mode of Cognition? Experimental Evidence on Pure Coordination Games," Department of Economics University of Siena 771, Department of Economics, University of Siena.
    4. Larry G. Epstein & Shaolin Ji, 2017. "Optimal Learning and Ellsberg's Urns," Papers 1708.01890, arXiv.org.
    5. Deck, Cary & Jahedi, Salar, 2015. "The effect of cognitive load on economic decision making: A survey and new experiments," European Economic Review, Elsevier, vol. 78(C), pages 97-119.
    6. repec:zbw:rwirep:0440 is not listed on IDEAS
    7. Ennio Bilancini & Leonardo Boncinelli, 2014. "Persuasion with Reference Cues and Elaboration Costs," Working Papers - Economics wp2014_04.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    8. Jeffrey Butler & Luigi Guiso & Tullio Jappelli, 2014. "The role of intuition and reasoning in driving aversion to risk and ambiguity," Theory and Decision, Springer, vol. 77(4), pages 455-484, December.
    9. Bergheim, Ralf & Roos, Michael W. M., 2013. "Intuition and Reasoning in Choosing Ambiguous and Risky Lotteries," Ruhr Economic Papers 440, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    10. Ralf Bergheim & Michael W.M. Roos, 2013. "Intuition and Reasoning in Choosing Ambiguous and Risky Lotteries," Ruhr Economic Papers 0440, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    11. Oechssler, Jörg & Roomets, Alex, 2015. "A test of mechanical ambiguity," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 153-162.

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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