An Experimental Test of Generalized Ambiguity Aversion using Lottery Pricing Tasks

Michael Bleaney and Steven Humphrey ()

Theory and Decision, 2006, vol. 60, issue 2, 257-282

Abstract: We report the results of an experiment which investigates the impact of the manner in which likelihood information is presented to decision-makers on valuations assigned to lotteries. We find that subjects who observe representative sequences of outcomes attach higher valuations to lotteries than those who are given only a verbal description of a probability distribution. We interpret this in terms of a reduction in ambiguity about the possible lottery outcomes. These findings suggest that ambiguity aversion may be a confounding factor in reported experimental violations of expected utility theory based on verbal descriptions of probability distributions. Copyright Springer 2006

Keywords: ambiguity; probability learning; competence and comprehension hypotheses; experiment; lottery valuations; D81; C91 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11238-005-4573-1

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