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Social and strategic ambiguity versus betrayal aversion

Chen Li, Uyanga Turmunkh and Peter Wakker

Games and Economic Behavior, 2020, vol. 123, issue C, 272-287

Abstract: This paper examines the difference between strategic ambiguity as in game theory and ambiguity arising in individual decisions. We identify a new, non-strategic component underlying all strategic ambiguities, called social ambiguity. We recommend controlling for it to better identify strategic causes. Thus, we shed new light on Bohnet and Zeckhauser's betrayal aversion in the trust game. We first show theoretically that, contrary to preceding claims in the literature, ambiguity attitudes can play a role here. We then show experimentally that social ambiguity, rather than betrayal aversion, can explain our empirical findings. Using our new control, we identify the unique effect of strategic ambiguity. Strategic complexity increases ambiguity perception and thus increases people's likelihood insensitivity when making decisions under strategic ambiguity. Our results show the usefulness of controlling for ambiguity attitudes before speculating on strategic factors.

Keywords: Social ambiguity; Betrayal aversion; Trust; Strategic uncertainty (search for similar items in EconPapers)
JEL-codes: C72 C81 D91 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.geb.2020.07.007

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Handle: RePEc:eee:gamebe:v:123:y:2020:i:c:p:272-287