Sadder but wiser: The Effects of Affective States and Weather on Ambiguity Attitudes

Aurelien Baillon (), Philipp Koellinger and Theresa Treffers
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Theresa Treffers: Technical University Eindhoven

No 14-044/I, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Many important decisions are made without precise information about the probabilities of the outcomes. In such situations, individual ambiguity attitudes influence decision making. The present study identifies affective states as a transient cause of ambiguity attitudes. We conducted two random-assignment, incentive-compatible laboratory experiments, varying subjects’ affective states. We find that sadness induces choices that are closer to ambiguity-neutral attitudes compared with the joy, fear, and control groups, where decision makers deviate more from payoff-maximizing behaviors and are more susceptible to likelihood insensitivity. We also find a similar pattern in a representative population sample where cloudy weather conditions on the day of the survey - a proxy for sad affect - correlate with more ambiguity-neutral attitudes. Our results may help explain re al-world phenomena such as financial markets that react to regular fluctuations in weather conditions.

Keywords: Ambiguity attitude; affect; joy; fear; sadness; weather; experiment. (search for similar items in EconPapers)
JEL-codes: D03 D81 (search for similar items in EconPapers)
Date: 2014-04-01
New Economics Papers: this item is included in nep-cbe and nep-exp
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20140044

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