Are ambiguity preferences aligned with risk preferences?

Kene Boun My, Marielle Brunette, Stéphane Couture and Sarah Van Driessche

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2024, vol. 111, issue C

Abstract: Decisions under risk and ambiguity are frequently encountered in our daily lives, and the associated preferences are often quantified. This article deals with the relationship between individuals’ preferences towards risk and ambiguity. In particular, we question the correlation of the preferences and their alignment. For that purpose, we analyze experimental data that measures individuals’ risk and ambiguity preferences through a lottery choice experiment. The results indicate that most of the subjects are risk-loving and ambiguity-averse. We also show that risk preferences and ambiguity preferences are negatively correlated. Finally, we prove that the majority of subjects have preferences towards ambiguity that are aligned with those towards risk, either perfectly or weakly. Thirty-four percent of the sample has preferences towards ambiguity that are the opposite of those towards risk.

Keywords: Risk; Uncertainty; Ambiguity; Preferences; Experiments (search for similar items in EconPapers)
JEL-codes: C91 D8 D9 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:111:y:2024:i:c:s2214804324000752

DOI: 10.1016/j.socec.2024.102237

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