Framing of decisions under ambiguity

Abstract

AbstractThis paper reports three experiments that illustrate framing of decision problems due to Ellsberg (1961) in which probabilities are ambiguous. Although the standard Ellsberg problems often induce violations of Savage's sure‐thing principle, framing of the equivalent problems in a sequential format reduces these violations. Nevertheless, this has an ironic consequence of introducing another inconsistency in the decision makers' choices: An inconsistency between the standard and sequential formulations of the Ellsberg problems.