Hedging, ambiguity, and the reversal of order axiom
Hannes Rau and
Games and Economic Behavior, 2019, vol. 117, issue C, 380-387
We ran experiments that gave subjects a straight-forward and simple opportunity to hedge away ambiguity in an Ellsberg-style experiment. Subjects had to make bets on the combined outcomes of a fair coin and a draw from an ambiguous urn. By modifying the timing of the draw, coin flip, and decision, we are able to test the reversal-of-order axiom. Our main result is that the reversal-of-order axiom seems to hold. We also confirm low levels of ambiguity hedging despite the relative obviousness of the opportunity.
Keywords: Ellsberg paradox; Hedging; Reversal of order axiom; Experiment (search for similar items in EconPapers)
JEL-codes: C91 C72 D74 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:117:y:2019:i:c:p:380-387
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