An Experimental Test of a Search Model under Knightian Uncertainty

Takao Asano, Hiroko Okudaira and Masaru Sasaki ()
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Takao Asano: Okayama University
Hiroko Okudaira: Okayama University

No 11-05, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper's objective is to design a laboratory experiment to explore the effect of Knightian uncertainty on a subject's search behavior in a finite sequential search model. Our finding is that the average search duration is shorter when there is Knightian uncertainty in the sense that the true point distribution is unknown to subjects, compared to when the point distribution is known. We also find direct evidence that subjects reduce their own reservation point when there is ambiguity about the point distribution. These results support the implication of Nishimura and Ozaki (2004). Moreover, ambiguity notably affects the search behavior of risk averse subjects, but not of either risk neutral or risk prone subjects.

Keywords: experiment; search model; ambiguity; risk attitude; optimal stopping rule (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2011-02
New Economics Papers: this item is included in nep-cdm, nep-dge and nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1105

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