Ambiguity preferences and likelihood insensitivity for asymmetric events

Maria Erazo and Yao Kpegli
Additional contact information
Maria Erazo: University of Bologna, Department of Economics, Bologna, Italy
Yao Kpegli: TREE - Transitions Energétiques et Environnementales - UPPA - Université de Pau et des Pays de l'Adour - CNRS - Centre National de la Recherche Scientifique

Working Papers from HAL

Abstract: We show that existing methods for measuring ambiguity attitudes for asymmetric events (i.e. unequally likely events) are prone to downward bias and misspecification. To address this, we propose a more robust approach and test it experimentally using both asymmetric and symmetric events (i.e. equally likely events) within the contexts of trust and coordination games. Our findings reveal that individuals i) prefer asymmetric events, showing lower ambiguity aversion compared to symmetric events, and ii) demonstrate greater likelihood insensitivity, as forming beliefs is more cognitively demanding for asymmetric events. These findings explain social ambiguity and strategic uncertainty in our experiment. We identify betrayal aversion as a disutility associated with trust decisions.

Keywords: subjective beliefs; ambiguity attitudes; trust game; coordination game; symmetric and asymmetric events (search for similar items in EconPapers)
Date: 2024-11-22
Note: View the original document on HAL open archive server: https://univ-pau.hal.science/hal-04799374v1
References: Add references at CitEc
Citations:

Downloads: (external link)
https://univ-pau.hal.science/hal-04799374v1/document (application/pdf)

Related works:
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:hal:wpaper:hal-04799374

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().