Testing Source Influence on Ambiguity Reaction: Preference and Insensitivity

Gianna Lotito, Anna Maffioletti () and Michele Santoni
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Anna Maffioletti: Department of Economics, Social Studies, Applied Mathematics and Statistics, University of Torino, Italy;

No 83, Working papers from Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino

Abstract: This study investigated whether different sources of uncertainty exert different influences on both the ambiguity aversion/preference and ambiguity-generated insensitivity to likelihood changes. These two dimensions of ambiguity attitude were measured using matching probabilities for three-fold partitioned events, without needing information about subjective likelihoods. A total of 133 Italian university students were randomly assigned to three different treatment groups. Treatments differed depending on the decision context associated with natural sources of uncertainty (i.e., the Covid-19 pandemic, sovereign interest spread, and football matches) under different national scenarios (i.e., France and Italy). The experimental hypothesis was that each decision context could be characterised by both different degrees of emotional involvement and different knowledge/competence of the participants. Additionally, all the participants faced an artificial source of uncertainty, which was always represented by Ellsberg's three-colour problem. The study found that, within treatments, participants were generally more ambiguity-averse when facing the artificial source of uncertainty than natural sources of uncertainty. However, they were less sensitive to likelihood changes when assessing natural rather than artificial sources of uncertainty. Keeping the national dimension of the decision context constant, the between-treatment comparison showed stronger ambiguity insensitivity for Covid-19 versus Football treatment in France. Overall, these findings provide evidence in favour of source preference (thereby, ambiguity aversion/preference depends on the source of uncertainty) but strong evidence in favour of source sensitivity (thereby, likelihood insensitivity depends on the source of uncertainty).

Keywords: Natural Sources of Ambiguity; Artificial Sources of Ambiguity; Source Preference; Source Sensitivity; Ellsberg Paradox. (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2023-10
New Economics Papers: this item is included in nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.bemservizi.unito.it/repec/tur/wpapnw/m83.pdf First version, 2023 (application/pdf)

Related works:
Journal Article: Testing source influence on ambiguity reaction: Preference and insensitivity (2024)
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