Attitudes toward uncertainty and randomization: an experimental study

Dominiak, Adam; Schnedler, Wendelin

doi:10.1007/s00199-011-0649-z

Cited by 44 publications

(22 citation statements)

References 32 publications

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“…Third, allowing subjects to choose which color is associated with the winning payoff reduces possible suspicion effects (Hey et al 2010). A possible disadvantage of allowing the choice of color is that it may bias findings against ambiguity aversion for those subjects who view randomizing over choice of color as a hedge against ambiguity (Raiffa 1961, Dominiak andSchnedler 2011). Color choice may also bias upward valuation of all bets through an illusion of control (Langer 1975).…”

Section: Ambiguity Implementationmentioning

confidence: 99%

Experiments on Compound Risk in Relation to Simple Risk and to Ambiguity

2015

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We conduct experiments measuring individual behavior under compound risk, simple risk, and ambiguity. We focus on (1) treatment of compound risks relative to simple risks and (2) the relationship between compound risk attitudes and ambiguity attitudes. We find that compound risks are valued differently than corresponding reduced simple risks. These differences measure compound risk attitudes. These attitudes display more aversion as the reduced probability of the winning event increases. Like Halevy [Halevy Y (2007) Ellsberg revisited: An experimental study. Econometrica 75:503-536], we find an association between compound risk reduction and ambiguity neutrality. However, in contrast to the almost perfect identification in Halevy's data, we find a substantially weaker relation in both directions. First, a majority of our ambiguity-neutral subjects fail to reduce compound risk. Second, almost a quarter of our subjects who reduce compound risk are nonneutral to ambiguity. All of the latter come from the more quantitatively sophisticated part of our subject pool.Data, as supplemental material, are available at http://dx

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Section: Ambiguity Implementationmentioning

confidence: 99%

Experiments on Compound Risk in Relation to Simple Risk and to Ambiguity

2015

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“…Their main finding is that there is no significant relationship between these two attitudes. One important difference between Dominiak and Schnedler's (2009) and our study is that we focus on investigating preference for randomization when probability is known, while they focus on the case where some probabilities (of the lotteries associated with the Ellsberg urn in their experiment) are unknown.…”

Section: Strong Form Of Preference For Randomizationmentioning

confidence: 99%

Preference towards control in risk taking: Control, no control, or randomize?

Li¹

2011

J Risk Uncertain

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This paper experimentally investigates preference towards different methods of control in risk taking. Participants are asked to choose between different ways for choosing which numbers to bet on for a gamble. They can choose the numbers themselves (control), let the experimenter choose (no control), or randomize. It is found that in addition to the more conventional preference for control, some participants prefer not to control, or randomization. These preferences are robust as participants are willing to pay a small amount of money to implement their preferred method. Most of the participants believe that the winning probability under different methods is the same. Thus, their preferences are not driven by bias in probability belief such as those induced by illusion of control. Participants tend to invest less in the risky gamble when they are not offered their preferred method.

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“…Thus there is no logical reason why one cannot assume strict preference for randomization in a descriptive theory. However the experimental evidence does not suggest that individuals express a strict preference for ex-ante randomization, Dominiak and Schnedler (2011). There is also evidence against a preference for ex-post randomization, see Eichberger, Oechssler, and Schnedler (2015).…”

Section: Resultsmentioning

confidence: 99%

Randomization and dynamic consistency

2015

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Rai¤a (1961) has suggested that ambiguity aversion will cause a strict preference for randomization. We show that dynamic consistency implies that individuals will be indi¤erent to ex-ante randomizations. On the other hand, it is possible for a dynamicallyconsistent ambiguity averse preference relation to exhibit a strict preference for some expost randomizations. We argue that our analysis throws some light on the recent debate on the status of the smooth model of ambiguity We show that this rests on whether the randomizations implicit in the set-up are viewed as being resolved before or after the (ambiguous) uncertainty.

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Attitudes toward uncertainty and randomization: an experimental study

Cited by 44 publications

References 32 publications

Experiments on Compound Risk in Relation to Simple Risk and to Ambiguity

Experiments on Compound Risk in Relation to Simple Risk and to Ambiguity

Preference towards control in risk taking: Control, no control, or randomize?

Randomization and dynamic consistency

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