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Comparing ambiguous urns with different sizes

Emel Filiz-Ozbay, Huseyin Gulen, Yusufcan Masatlioglu and Erkut Y. Ozbay

Journal of Economic Theory, 2022, vol. 199, issue C

Abstract: We investigate experimentally preferences between different ambiguous processes generated by two-color Ellsberg urns. By providing symmetric information on urns with different numbers of beads and keeping the information on the most optimistic, pessimistic, and equal probability of winning possibilities the same, we elicit subjects' preferences for the size of an ambiguous urn. Subjects prefer the bets from the ambiguous urns with more beads. We analyze the role of ambiguity aversion and ratio bias of subjects in this behavior. We study the restrictions that our findings impose on the existing ambiguity models.

Keywords: Ambiguity; Risk; Ratio bias; Ellsberg's experiment (search for similar items in EconPapers)
JEL-codes: C90 C91 D80 D81 D83 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jet.2021.105224

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