Discriminating between Models of Ambiguity Attitude: A Qualitative Test

Robin Cubitt, Gijs Kuilen and Sujoy Mukerji

No 831, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: During recent decades, many new models have emerged in pure and applied economic theory according between Epstein (2010) and Klibanoff et al. (2012) identified a notable behavioural issue that distinguishes sharply between two classes of models of ambiguity sensitivity that are importantly different. The two classes are exemplified by the -MEU model and the smooth ambiguity model, respectively; and the issue is whether or not a desire to hedge independently resolving ambiguities contributes to an ambiguity averse preference for a randomised act. Building on this insight, we implement an experiment whose design provides a qualitative test that discriminates between the two classes of models. Among subjects identified as ambiguity sensitive, we find greater support for the class exemplified by the smooth ambiguity model; the relative support is stronger among subjects identified as ambiguity averse. This finding has implications for applications which rely on specific models of ambiguity preference.

Keywords: Ambiguity sensitivity; ambiguity attitude; testing models of ambiguity sensitive preference (search for similar items in EconPapers)
JEL-codes: C91 D01 D03 D81 G02 (search for similar items in EconPapers)
Date: 2017-08-18
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Discriminating Between Models of Ambiguity Attitude: a Qualitative Test (2020)
Working Paper: Discriminating between Models of Ambiguity Attitude: A Qualitative Test (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:831

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