Ambiguity Aversion is the Exception

Martin Kocher, Amrei M. Lahno and Stefan Trautmann

No 5261, CESifo Working Paper Series from CESifo

Abstract: Assuming universal ambiguity aversion, an extensive theoretical literature studies how ambiguity can account for market anomalies from the perspective of expected utility-based theories. We provide a systematic experimental assessment of ambiguity attitudes in different likelihood ranges and in the gain domain, the loss domain and with mixed outcomes. We draw on a unified framework with more than 500 participants and find that ambiguity aversion is the exception, not the rule. We replicate the usual finding of ambiguity aversion for moderate likelihood gains. However, when introducing losses or lower likelihoods, we observe ambiguity neutrality or seeking, rejecting universal ambiguity aversion.

Keywords: ambiguity aversion; decision under uncertainty; Ellsberg experiments (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Working Paper: Ambiguity aversion is the exception (2015)
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