The Rich Domain of Ambiguity Explored

Julia Müller (), Zhihua Li, Peter Wakker and Tong V. Wang

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: Ellsberg and others suggested that decision under ambiguity is a rich empirical domain with many phenomena to be investigated beyond the Ellsberg urns. We provide a systematic empirical investigation of this richness by varying both the uncertain events, the outcomes, and combinations of these. Although ambiguity aversion is prevailing, we also find systematic ambiguity seeking, confirming insensitivity. We find that ambiguity attitudes depend on the source of uncertainty (the kind of uncertain event) but not on the outcomes. Ambiguity attitudes are closer to rationality (ambiguity neutrality) for natural uncertainties than for the Ellsberg urns, as appearing from the reductions of monotonicity violations and of insensitivity. Our rich domain serves well to test families of weighting functions for fitting ambiguity attitudes. We find that two-parameter families, capturing not only aversion but also insensitivity, are desirable for ambiguity even more than for risk. The Goldstein-Einhorn family performs best for ambiguity.

JEL-codes: C91 D80 D81 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-exp, nep-hpe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: The Rich Domain of Ambiguity Explored (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145734

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