Uncertainty Aversion and Preference for Randomization
Wendelin Schnedler and
Adam Dominiak ()
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Adam Dominiak: Alfred-Weber-Institut, Postal: Grabengasse 14, 69117 Heidelberg
No 08-39, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim
Individuals exhibit preferences for randomization if they prefer random mixtures of two bets to each of the involved bets. Such preferences underpin various models of uncertainty aversion. However, it has to our knowledge not been empirically investigated whether uncertainty-averse decision makers indeed exhibit such preferences. Here, we examine the relationship experimentally. We nd that uncertainty aversion is not positively associated with preferences for randomization. Moreover, we observe a puzzling behavior that is not predicted: a non-negligible number of uncertain-averse subjects seem to dislike randomization.
Pages: 27 pages
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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Working Paper: Uncertainty aversion and preference for randomization (2008)
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