Sampling Experience Reverses Preferences for Ambiguity

Eyal Ert () and Stefan Trautmann

No 164346, Discussion Papers from Hebrew University of Jerusalem, Department of Agricultural Economics and Management

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. Studies of ambiguity attitudes have thus far 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. The effect cannot be explained by an extreme updating of probabilistic beliefs, suggesting direct effects of sampling on attitudes toward ambiguity. ¹ Department

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 18
Date: 2012
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Journal Article: Sampling experience reverses preferences for ambiguity (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:huaedp:164346

DOI: 10.22004/ag.econ.164346

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