Much uncertainty in life relates to the behaviour of others in interactive environments. This article tests some implications of subjective expected utility theory (Savage, 1954) in an experimental strategic setting where there is uncertainty about the actions of other players. In this environment, a large majority of our participants violate subjective expected utility theory. However, they do not exhibit the sorts of consistent ‘attitude to ambiguity’ found in individual decision experiments. We discuss three possible explanations of their behaviour: non-linear transformation of probabilities; noise in responses; and/or systematic biases in the way that individuals generate subjective probabilities.
|Journal||The Economic Journal|
|Publication status||Published - 24 May 2017|