Is ambiguity aversion a preference? Ambiguity aversion without asymmetric information

Daniel L. Chen
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Daniel L. Chen: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Ambiguity aversion is the interpretation of the experimental finding (the Ellsberg paradox) that most subjects prefer betting on events whose probabilities are known (objective) to betting on events whose probabilities are unknown (subjective). However in typical experiments these unknown probabilities are known by others. Thus the typical Ellsberg experiment is a situation of asymmetric information. People may try to avoid situations where they are the less informed party, which is normatively appropriate. We find that eliminating asymmetric information in the Ellsberg experiment while leaving ambiguity in place, makes subjects prefer the ambiguous bet over the objective one, reversing the prior results.

Keywords: Uncertainty aversion; Probabilistic sophistication; Sources of ambiguity; Ellsberg paradox (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-cbe, nep-dcm, nep-exp and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-05012232v1
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Published in Journal of Behavioral and Experimental Economics, 2024, 111, pp.102218. ⟨10.1016/j.socec.2024.102218⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05012232

DOI: 10.1016/j.socec.2024.102218

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