How much ambiguity aversion?: Finding indifferences between Ellsberg's risky and ambiguous bets
Date
2012
Authors
Binmore, Ken
Stewart, Lisa
Voorhoeve, Alex
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Publisher
Kluwer Academic Publishers
Abstract
Experimental results on the Ellsberg paradox typically reveal behavior that is commonly interpreted as ambiguity aversion. The experiments reported in the current paper find the objective probabilities for drawing a red ball that make subjects indifferent between various risky and uncertain Ellsberg bets. They allow us to examine the predictive power of alternative principles of choice under uncertainty, including the objective maximin and Hurwicz criteria, the sure-thing principle, and the principle of insufficient reason. Contrary to our expectations, the principle of insufficient reason performed substantially better than rival theories in our experiment, with ambiguity aversion appearing only as a secondary phenomenon.
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Keywords
Keywords: Ambiguity aversion; Ellsberg paradox; Hurwicz criterion; Maximin criterion; Principle of insufficient reason
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Source
Journal of Risk and Uncertainty
Type
Journal article
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2037-12-31