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An Experimental Test of Generalized Ambiguity Aversion using Lottery Pricing Tasks

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Abstract

We report the results of an experiment which investigates the impact of the manner in which likelihood information is presented to decision-makers on valuations assigned to lotteries. We find that subjects who observe representative sequences of outcomes attach higher valuations to lotteries than those who are given only a verbal description of a probability distribution. We interpret this in terms of a reduction in ambiguity about the possible lottery outcomes. These findings suggest that ambiguity aversion may be a confounding factor in reported experimental violations of expected utility theory based on verbal descriptions of probability distributions.

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Authors and Affiliations

  1. Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham, Nottingham, NG7 2RD, UK

    Michael Bleaney & Steven J. Humphrey

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  1. Michael Bleaney
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  2. Steven J. Humphrey
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Correspondence to Steven J. Humphrey.

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Bleaney, M., Humphrey, S.J. An Experimental Test of Generalized Ambiguity Aversion using Lottery Pricing Tasks. Theor Decis 60, 257–282 (2006). https://doi.org/10.1007/s11238-005-4573-1

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  • DOI: https://doi.org/10.1007/s11238-005-4573-1

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