Reference

Giuseppe Marco Attanasi, Christian Gollier, Aldo Montesano, and Noémie Pace, Eliciting ambiguity aversion in unknown and in compound lotteries: A KMM experimental approach, TSE Working Paper, n. 12-338, September 15, 2012.

Abstract

We define coherent-ambiguity aversion within the Klibano¤, Marinacci and Mukerji (2005) smooth ambiguity model (henceforth KMM) as the combination of choice-ambiguity aversion and value-ambiguity aversion. We analyze theoretically ?ve ambiguous decision tasks, where a subject faces two-stage lotteries with binomial, uniform or unknown second-order probabilities. We check our theoretical predictions through a 10-task laboratory experiment. In (unambiguous) tasks 1-5, we elicit risk aversion both through a portfolio choice method and through a BDM mechanism. In (ambiguous) tasks 6-10, we elicit choice-ambiguity aversion through the portfolio choice method and value-ambiguity aversion through the BDM mechanism. We ?nd that more than 75% of classi?ed subjects behave according to the KMM model in all tasks 6-10, independent of their degree of risk aversion. Further, the percentage of coherently-ambiguity-averse subjects is lower in the binomial than in the uniform and in the unknown treatment, with only the latter di¤erence being signi?cant. Finally, highly-risk-averse subjects are more prone to coherent-ambiguity.

Keywords

coherent-ambiguity aversion; value-ambiguity aversion; choice-ambiguity aversion; smooth ambiguity model; binomial distribution; uniform distribution; unknown urn;

JEL codes

  • C91: Laboratory, Individual Behavior
  • D81: Criteria for Decision-Making under Risk and Uncertainty
  • D83: Search • Learning • Information and Knowledge • Communication • Belief
  • Replaced by

    Giuseppe Marco Attanasi, Christian Gollier, Aldo Montesano, and Noémie Pace, Eliciting ambiguity aversion in unknown and in compound lotteries: A smooth ambiguity model experimental study, Theory and Decision, vol. 77, n. 4, December 2014, pp. 485–530.