The rich domain of ambiguity explored

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The rich domain of ambiguity explored. / Li, Zhihua; Muller, Julia; Wakker, Peter; Wang, Tong.

In: Management Science, Vol. 64, No. 7, 07.2018, p. 3227–3240.

Research output: Contribution to journalArticlepeer-review

Harvard

Li, Z, Muller, J, Wakker, P & Wang, T 2018, 'The rich domain of ambiguity explored', Management Science, vol. 64, no. 7, pp. 3227–3240. https://doi.org/10.1287/mnsc.2017.2777

APA

Li, Z., Muller, J., Wakker, P., & Wang, T. (2018). The rich domain of ambiguity explored. Management Science, 64(7), 3227–3240. https://doi.org/10.1287/mnsc.2017.2777

Vancouver

Author

Li, Zhihua ; Muller, Julia ; Wakker, Peter ; Wang, Tong. / The rich domain of ambiguity explored. In: Management Science. 2018 ; Vol. 64, No. 7. pp. 3227–3240.

Bibtex

@article{66f407139c774ff7b955d2e860aeb2d7,
title = "The rich domain of ambiguity explored",
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 the uncertain events, the outcomes, and combinations of both. Although ambiguity aversion is prevailing, we also find systematic ambiguity seeking, confirming insensitivity. We find that ambiguity attitudes depend on the kind of uncertainty (the source) but not on the kind of outcomes. Ambiguity attitudes are closer to rationality (ambiguity neutrality) for natural uncertainties than for artificial Ellsberg urn uncertainties. This also appears from the reductions of monotonicity violations and of insensitivity. Ambiguity attitudes have predictive power across different outcomes and sources of uncertainty, with individual-specific components. 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 performed best for ambiguity.",
keywords = "ambiguity aversion , likelihood insensitivity , pessimism , rationality , fourfold pattern",
author = "Zhihua Li and Julia Muller and Peter Wakker and Tong Wang",
year = "2018",
month = jul,
doi = "10.1287/mnsc.2017.2777",
language = "English",
volume = "64",
pages = "3227–3240",
journal = "Management Science",
issn = "0025-1909",
publisher = "INFORMS",
number = "7",

}

RIS

TY - JOUR

T1 - The rich domain of ambiguity explored

AU - Li, Zhihua

AU - Muller, Julia

AU - Wakker, Peter

AU - Wang, Tong

PY - 2018/7

Y1 - 2018/7

N2 - 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 the uncertain events, the outcomes, and combinations of both. Although ambiguity aversion is prevailing, we also find systematic ambiguity seeking, confirming insensitivity. We find that ambiguity attitudes depend on the kind of uncertainty (the source) but not on the kind of outcomes. Ambiguity attitudes are closer to rationality (ambiguity neutrality) for natural uncertainties than for artificial Ellsberg urn uncertainties. This also appears from the reductions of monotonicity violations and of insensitivity. Ambiguity attitudes have predictive power across different outcomes and sources of uncertainty, with individual-specific components. 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 performed best for ambiguity.

AB - 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 the uncertain events, the outcomes, and combinations of both. Although ambiguity aversion is prevailing, we also find systematic ambiguity seeking, confirming insensitivity. We find that ambiguity attitudes depend on the kind of uncertainty (the source) but not on the kind of outcomes. Ambiguity attitudes are closer to rationality (ambiguity neutrality) for natural uncertainties than for artificial Ellsberg urn uncertainties. This also appears from the reductions of monotonicity violations and of insensitivity. Ambiguity attitudes have predictive power across different outcomes and sources of uncertainty, with individual-specific components. 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 performed best for ambiguity.

KW - ambiguity aversion

KW - likelihood insensitivity

KW - pessimism

KW - rationality

KW - fourfold pattern

U2 - 10.1287/mnsc.2017.2777

DO - 10.1287/mnsc.2017.2777

M3 - Article

VL - 64

SP - 3227

EP - 3240

JO - Management Science

JF - Management Science

SN - 0025-1909

IS - 7

ER -