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Discriminating between Models of Ambiguity Attitude: A Qualitative Test

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  • Sujoy Mukerji
  • Robin Cubitt
  • Gijs van de Kuilen

Abstract

The exchange between Epstein (2010) and Klibanoff et al. (2012) identified a behavioral issue that sharply distinguishes between two classes of models of ambiguity sensitivity, exemplified by the α-MEU model and the smooth ambiguity model, respectively. The issue in question is whether a subject’s preference for a randomized act (compared to its pure constituents) is influenced by a desire to hedge independently resolving ambiguities. Building on this insight, we implement an experiment whose design provides a qualitative test that discriminates between these importantly distinct classes of models. Among subjects identified as ambiguity sensitive, we find greater support for the class exemplified by the smooth ambiguity model; the relative support is stronger among subjects identified as ambiguity averse.

Suggested Citation

  • Sujoy Mukerji & Robin Cubitt & Gijs van de Kuilen, 2014. "Discriminating between Models of Ambiguity Attitude: A Qualitative Test," Economics Series Working Papers 692, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:692
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    References listed on IDEAS

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    Cited by:

    1. repec:kap:theord:v:85:y:2018:i:3:d:10.1007_s11238-018-9657-9 is not listed on IDEAS
    2. Roxane Bricet, 2018. "Preferences for information precision under ambiguity," THEMA Working Papers 2018-09, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    3. Jianying Qiu & Utz Weitzel, 2016. "Experimental evidence on valuation with multiple priors," Journal of Risk and Uncertainty, Springer, vol. 53(1), pages 55-74, August.
    4. Robin Cubitt & Gijs Kuilen & Sujoy Mukerji, 2018. "The strength of sensitivity to ambiguity," Theory and Decision, Springer, vol. 85(3), pages 275-302, October.
    5. repec:wly:hlthec:v:27:y:2018:i:11:p:1699-1716 is not listed on IDEAS
    6. repec:spr:joecth:v:67:y:2019:i:1:d:10.1007_s00199-017-1095-3 is not listed on IDEAS
    7. Arthur E. Attema & Han Bleichrodt & Olivier L'Haridon, 2018. "Ambiguity preferences for health," Health Economics, John Wiley & Sons, Ltd., vol. 27(11), pages 1699-1716, November.

    More about this item

    Keywords

    Ambiguity sensitivity; ambiguity attitude; testing models of ambiguity sensitive preference;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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