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Uncertainty aversion in game theory: Experimental evidence

Evan Calford ()

Journal of Economic Behavior & Organization, 2020, vol. 176, issue C, 720-734

Abstract: This paper studies, using a laboratory experiment, the effects of uncertainty aversion (the union of risk aversion and ambiguity aversion) on behavior in a normal form game. We isolate and identify two components of uncertainty aversion in games: the effect of an agent’s own uncertainty preferences and effect of the agent’s beliefs regarding their opponent’s uncertainty preferences. Uncertainty preferences are correlated with behavior in games. Induced beliefs about the risk preferences of an opponent have a larger effect on strategic behavior than induced beliefs about an opponent’s ambiguity preferences, although both components have a significant effect on behavior. The results support the hypothesis that strategic uncertainty is an important determinant of strategic behavior, and that the response to strategic uncertainty is modulated by subject uncertainty attitudes.

Keywords: Ambiguity aversion; Experimental economics; Game theory; Uncertainty preferences (search for similar items in EconPapers)
JEL-codes: C72 C92 D81 D83 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Uncertainty Aversion in Game Theory: Experimental Evidence (2017) Downloads
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DOI: 10.1016/j.jebo.2020.06.011

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