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An Experimental Test of a Search Model under Knightian Uncertainty

  • Takao Asano

    (Okayama University)

  • Hiroko Okudaira

    (Okayama University)

  • Masaru Sasaki

    ()

    (Osaka University)

This paper's objective is to design a laboratory experiment to explore the effect of Knightian uncertainty on a subject's search behavior in a finite sequential search model. Our finding is that the average search duration is shorter when there is Knightian uncertainty in the sense that the true point distribution is unknown to subjects, compared to when the point distribution is known. We also find direct evidence that subjects reduce their own reservation point when there is ambiguity about the point distribution. These results support the implication of Nishimura and Ozaki (2004). Moreover, ambiguity notably affects the search behavior of risk averse subjects, but not of either risk neutral or risk prone subjects.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1105.pdf
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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 11-05.

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Length: 39 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:osk:wpaper:1105
Contact details of provider: Web page: http://www.econ.osaka-u.ac.jp/
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  1. Chen, Yan & Katuscak, Peter & Ozdenoren, Emre, 2007. "Sealed bid auctions with ambiguity: Theory and experiments," Journal of Economic Theory, Elsevier, vol. 136(1), pages 513-535, September.
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