Ambiguity attitudes, framing, and consistency

Abstract

We use probability-matching variations on Ellsberg's single-urn experiment to assess three questions: (1) How sensitive are ambiguity attitudes to changes from a gain to a loss frame? (2) How sensitive are ambiguity attitudes to making ambiguity easier to recognize? (3) What is the relation between subjects' consistency of choice and the ambiguity attitudes their choices display? Contrary to most other studies, we find that a switch from a gain to a loss frame does not lead to a switch from ambiguity aversion to ambiguity neutrality and/or ambiguity seeking. We also find that making ambiguity easier to recognize has little effect. Finally, we find that while ambiguity aversion does not depend on consistency, other attitudes do: consistent choosers are much more likely to be ambiguity neutral, while ambiguity seeking is much more frequent among highly inconsistent choosers.

Welfare economics, risk and uncertainty

“…and Voorhoeve et al. ). Bradley () theorizes a different type of attitude, in which people attribute value to chances (over and beyond final outcomes) in such a way as to generate ambiguity aversion for gains and ambiguity love for losses.…”

“…Of course, if ambiguity triggers emotions in the population, the social evaluator may rationally want to take account of them, but this is very different from adopting an ambiguityaverse decision criterion. It should be mentioned that there is empirical work questioning the prevalence of ambiguity aversion in the population, especially for losses as opposed to gains (see conflicting results in Kocher et al 2015 andVoorhoeve et al 2016). Bradley (2016) theorizes a different type of attitude, in which people attribute value to chances (over and beyond final outcomes) in such a way as to generate ambiguity aversion for gains and ambiguity love for losses.…”

On the Foundations of Decision Theory

“…For example, Halevy (2007) screens out subjects who do not understand how to simplify compound lotteries. Voorhoeve et al (2016) screen out subjects who do not consistently give the same answer to questions that differ only in their framing.…”

The strength of sensitivity to ambiguity

“…Their uses are elaborated by Dimmock et al ( 2016 ) and Baillon et al ( 2017 ), which assess ambiguity sensitivity in large representative samples, and by Baillon et al ( 2016a ) which uses them to measure ambiguity attitudes for natural events. As these studies and Voorhoeve et al ( 2016 ) illustrate, matching probabilities do not have to be used to estimate parameters of theoretical models, though that is the main use Dimmock et al ( 2015 ) and Baillon et al ( 2017 ) make of them. We consider matching probabilities further in Appendix D .…”