Abstract
We use probability-matching variations on Ellsberg’s single-urn experiment to assess three questions: (1) How sensitive are ambiguity attitudes to changes from a gain to a loss frame? (2) How sensitive are ambiguity attitudes to making ambiguity easier to recognize? (3) What is the relation between subjects’ consistency of choice and the ambiguity attitudes their choices display? Contrary to most other studies, we find that a switch from a gain to a loss frame does not lead to a switch from ambiguity aversion to ambiguity neutrality and/or ambiguity seeking. We also find that making ambiguity easier to recognize has little effect. Finally, we find that while ambiguity aversion does not depend on consistency, other attitudes do: consistent choosers are much more likely to be ambiguity neutral, while ambiguity seeking is much more frequent among highly inconsistent choosers.
Highlights
Experiments on the Ellsberg paradox generally show substantial aversion to ambiguity when people face choices involving moderate-to-high probability gains
The literature finds that ambiguity aversion is not robust to changes in framing, with subjects being more ambiguity loving when faced with losses (Trautmann and Van der Kuijlen 2016)
This paper addresses the following three questions: (i) Is a substantial shift observable from ambiguity aversion towards ambiguity neutrality and/or ambiguity seeking when one changes from a gain to a loss frame?
Summary
Experiments on the Ellsberg paradox generally show substantial aversion to ambiguity when people face choices involving moderate-to-high probability gains. The literature finds that ambiguity aversion is not robust to changes in framing, with subjects being more ambiguity loving when faced with losses (Trautmann and Van der Kuijlen 2016). We examine whether these findings hold up by reframing one of Ellsberg’s experiments in terms of losses rather than gains and by emphasizing ambiguity. We explore the hypothesis advanced by Charness et al (2013) and Stahl (2014) that sensitivity to ambiguity is primarily due to “noisy” subjects. We find that the higher the level of consistency we require, the more ambiguity neutral and the less ambiguity seeking our subjects become. Remains moderate and constant across all levels of consistency
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