Characterizing ambiguity attitudes using model uncertainty

Loïc Berger and Valentina Bosetti

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Abstract: We report the results of an experiment eliciting individuals' attitudes toward risk and model uncertainty. Using a joint elicitation procedure, we then precisely quantify the strength of individuals' attitude toward ambiguity in the context of the smooth model and characterize its main properties. Our results provide empirical evidence of decreasing absolute ambiguity aversion (DAAA) and constant relative ambiguity aversion (CRAA). These results shed new light on the way ambiguity attitudes may affect important decisions, such as the choice of health insurance policies or the optimal investment strategy in the face of climate change.

Keywords: Ambiguity aversion; Laboratory experiment; Non-expected utility; Subjective probabilities; Decreasing absolute ambiguity aversion (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-exp, nep-ias and nep-upt
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Citations: View citations in EconPapers (12)

Published in Journal of Economic Behavior and Organization, 2020, 180, pp.621-637. ⟨10.1016/j.jebo.2020.02.014⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03031502

DOI: 10.1016/j.jebo.2020.02.014

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