Sampling experience reverses preferences for ambiguity

Eyal Ert () and Stefan Trautmann

Journal of Risk and Uncertainty, 2014, vol. 49, issue 1, 42 pages

Abstract: People often need to choose between alternatives with known probabilities (risk) and alternatives with unknown probabilities (ambiguity). Such decisions are characterized by attitudes towards ambiguity, which are distinct from risk attitudes. Most studies of ambiguity attitudes have focused on the static case of single choice, where decision makers typically prefer risky over ambiguous prospects. However, in many situations, decision makers may be able to sample outcomes of an ambiguous alternative, allowing for inferences about its probabilities. The current paper finds that such sampling experience reverses the pattern of ambiguity attitude observed in the static case. This effect can only partly be explained by the updating of probabilistic beliefs, suggesting a direct effect of sampling on attitudes toward ambiguity. Copyright Springer Science+Business Media New York 2014

Keywords: C91; D81; Ambiguity aversion; Decisions from experience; Sampling; Probability estimates (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (20)

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Working Paper: Sampling Experience Reverses Preferences for Ambiguity (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jrisku:v:49:y:2014:i:1:p:31-42

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DOI: 10.1007/s11166-014-9197-9

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