Uncertainty Aversion and Preference for Randomization
Individuals exhibit preferences for randomization if they prefer random mixtures of two bets to each of the involved bets. Such preferences underpin various models of uncertainty aversion. However, it has to our knowledge not been empirically investigated whether uncertainty-averse decision makers indeed exhibit such preferences. Here, we examine the relationship experimentally. We nd that uncertainty aversion is not positively associated with preferences for randomization. Moreover, we observe a puzzling behavior that is not predicted: a non-negligible number of uncertain-averse subjects seem to dislike randomization.
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|Date of creation:||24 Dec 2008|
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|Note:||Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.|
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