The Rich Domain of Risk
Olivier Armantier () and
Nicolas Treich ()
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Olivier Armantier: Federal Reserve Bank of New York, New York, New York 10045
Management Science, 2016, vol. 62, issue 7, 1954-1969
We report on two experiments challenging the common assumption that events with objective probabilities constitute a unique source of uncertainty. We find that, similar to the domain of ambiguity, the domain of risk is rich in the sense that behavior is systematically different when subjects face risky bets based on simple or more complex events. Furthermore, we find a tight association between attitudes toward complex risky bets and attitudes toward both ambiguity and compound lotteries. These results raise questions about the characterization of ambiguity aversion and the modeling of decisions under uncertainty. This paper was accepted by James Smith, decision analysis .
Keywords: decision analysis; risk; utility preference; theory (search for similar items in EconPapers)
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Persistent link: http://EconPapers.repec.org/RePEc:inm:ormnsc:v:62:y:2016:i:7:p:1954-1969
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