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Preferences for information precision under ambiguity

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  • Roxane Bricet

    () (Université de Cergy-Pontoise, THEMA)

Abstract

This paper presents an experiment designed to measure the effect of information precision on ambiguity attitudes. The Ellsberg’s two-urns experiment is adapted so that the subjects are provided with sets of observations informing on the composition of the ambiguous urn. The central feature of the design consists in keeping the frequencies of observations constant across datasets, which allows to isolate the influence of information precision by varying the number of observations. The experimental results suggest that the availability of information does not eliminate Ellsberg-type preferences, since most subjects prefer the risky urn to the ambiguous urn to bet on both colors, but it does not translate into significantly different valuations for the risky and ambiguous prospects. Moreover, I do not find evidence that the increase in information precision is associated with higher valuation of the ambiguous prospect.

Suggested Citation

  • Roxane Bricet, 2018. "Preferences for information precision under ambiguity," THEMA Working Papers 2018-09, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2018-09
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    Keywords

    Preferences for information precision; Ambiguity; Ellsberg paradox; Certainty Equivalence; Preference Reversals; Experiment; Prince.;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • 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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