IDEAS home Printed from
   My bibliography  Save this paper

Is Ambiguity Aversion a Preference?


  • Chen, Daniel L.
  • Schonger, Martin


Ambiguity aversion has been used to explain a wide range of phenomena in law and policy: incomplete contracts, stock market volatility, abstention from voting, and why prosecutors offer and defendants accept harsh plea bargains. This paper presents evidence problematizing the experimental basis for ambiguity aversion. Ambiguity aversion is the interpretation of the experimental finding (Ellsberg paradox) that most subjects violate probabilistic sophistication: They prefer betting on events whose probabilities are known (objective) to betting on events whose probabilities are unknown to them (subjective). However in typical experiments these unknown probabilities are known and often determined by the experimenter. Thus the typical Ellsberg experiment is a situation of asymmetric information. People may try to avoid situations where they are the less informed party in an asymmetric situation setting. Indeed doing so is often normatively appropriate. Thus avoidance of situations of informational asymmetry is a potential confound in typical Ellsberg experiments. Paying to avoid information asymmetry in an Ellsberg experiment would constitute the misapplication of a heuristic to the unfamiliar experimental situation. To eliminate this confound, this paper proposes a new source of ambiguity: participant generated ambiguity. Instead of the experimenter filling an Ellsberg urn, the opaque Ellsberg urn is filled by the other subjects in a laboratory session. We find that eliminating asymmetric information while leaving ambiguity in place, makes subjects more than willing to choose the ambiguous bet rather than the objective one. This is despite the fact that choosing the objective bet is costless. These results have fundamental implications for individual decision making and for the empirical predictions of theoretical models incorporating Knightian uncertainty.

Suggested Citation

  • Chen, Daniel L. & Schonger, Martin, 2016. "Is Ambiguity Aversion a Preference?," IAST Working Papers 16-52, Institute for Advanced Study in Toulouse (IAST), revised Feb 2020.
  • Handle: RePEc:tse:iastwp:31023

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    File Function: Full text
    Download Restriction: no

    Other versions of this item:


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Dominiak, Adam & Duersch, Peter, 2019. "Interactive Ellsberg tasks: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 161(C), pages 145-157.

    More about this item


    uncertainty aversion; probabilistic sophistication; sources of ambiguity; Ellsberg paradox;
    All these keywords.

    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
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:iastwp:31023. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.