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Is ambiguity aversion a preference? Ambiguity aversion without asymmetric information

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  • Daniel L. Chen

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Ambiguity aversion is the interpretation of the experimental finding (the Ellsberg paradox) that most subjects prefer betting on events whose probabilities are known (objective) to betting on events whose probabilities are unknown (subjective). However in typical experiments these unknown probabilities are known by others. Thus the typical Ellsberg experiment is a situation of asymmetric information. People may try to avoid situations where they are the less informed party, which is normatively appropriate. We find that eliminating asymmetric information in the Ellsberg experiment while leaving ambiguity in place, makes subjects prefer the ambiguous bet over the objective one, reversing the prior results.

Suggested Citation

  • Daniel L. Chen, 2024. "Is ambiguity aversion a preference? Ambiguity aversion without asymmetric information," Post-Print hal-05012232, HAL.
    • Handle: RePEc:hal:journl:hal-05012232
    DOI: 10.1016/j.socec.2024.102218
    Note: View the original document on HAL open archive server: https://hal.science/hal-05012232v1
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    References listed on IDEAS

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