Eliciting ambiguity aversion in unknown and in compound lotteries: A KMM experimental approach

Giuseppe Attanasi, Christian Gollier (), Aldo Montesano and Noemi Pace

No 12-338, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We define coherent-ambiguity aversion within the Klibanoff, Marinacci and Mukerji (2005) smooth ambiguity model (henceforth KMM) as the combination of choice-ambiguity aversion and value-ambiguity aversion. We analyze theoretically ?ve ambiguous decision tasks, where a subject faces two-stage lotteries with binomial, uniform or unknown second-order probabilities. We check our theoretical predictions through a 10-task laboratory experiment. In (unambiguous) tasks 1-5, we elicit risk aversion both through a portfolio choice method and through a BDM mechanism. In (ambiguous) tasks 6-10, we elicit choice-ambiguity aversion through the portfolio choice method and value-ambiguity aversion through the BDM mechanism. We ?nd that more than 75% of classi?ed subjects behave according to the KMM model in all tasks 6-10, independent of their degree of risk aversion. Further, the percentage of coherently-ambiguity-averse subjects is lower in the binomial than in the uniform and in the unknown treatment, with only the latter difference being signi?cant. Finally, highly-risk-averse subjects are more prone to coherent-ambiguity.

Keywords: coherent-ambiguity aversion; value-ambiguity aversion; choice-ambiguity aversion; smooth ambiguity model; binomial distribution; uniform distribution; unknown urn (search for similar items in EconPapers)
JEL-codes: C91 D81 D83 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.tse-fr.eu/sites/default/files/medias/doc/wp/bee/eliciting.pdf Full text (application/pdf)

Related works:
Working Paper: Eliciting ambiguity aversion in unknown and in compound lotteries: A KMM experimental approach (2012)
Working Paper: Eliciting ambiguity aversion in unknown and in compound lotteries: A KMM experimental approach (2012)
Working Paper: Eliciting ambiguity aversion in unknown and in compound lotteries: A KMM experimental approach (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:26314

Access Statistics for this paper

More papers in TSE Working Papers from Toulouse School of Economics (TSE) Contact information at EDIRC.
Bibliographic data for series maintained by ().