Uncertainty Aversion in Game Theory: Experimental Evidence
Evan Calford ()
Purdue University Economics Working Papers from Purdue University, Department of Economics
This paper experimentally investigates the role of uncertainty aversion in normal form games. Theoretically, risk aversion will affect the utility value assigned to realized outcomes while ambiguity aversion affects the evaluation of strategies. In practice, however, utilities over outcomes are unobservable and the effects of risk and ambiguity are confounded. This paper introduces a novel methodology for identifying the effects of risk and ambiguity preferences on behavior in games in a laboratory environment. Furthermore, we also separate the effects of a subject's beliefs over her opponent's preferences from the effects of her own preferences. The results support the conjecture that both preferences over uncertainty and beliefs over opponent's preferences affect behavior in normal form games.
Keywords: Ambiguity Aversion; Game Theory; Experimental Economics; Preferences (search for similar items in EconPapers)
JEL-codes: C92 C2 D81 D83 (search for similar items in EconPapers)
Pages: 39 pages
New Economics Papers: this item is included in nep-exp, nep-gth and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:pur:prukra:1291
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