Hedging, ambiguity, and the reversal of order axiom

Randomization and Ambiguity Aversion

“…Empirical studies have examined whether individuals strictly prefer to randomize. For example, Dominiak and Schnedler (2011), Agranov and Ortoleva (2017), Dwenger, Kübler, and Weizsäcker (2018), and Oechssler, Rau, and Roomets (2019). Many of them find a nonnegligible number of individuals who strictly prefer to randomize, but some do not.…”

“…See Section 5 for a more detailed discussion. 8 Among others, seeEpstein, Marinacci, and Seo (2007),Bade (2015),Saito (2015),Baillon, Halevy, and Li (2019),and Oechssler, Rau, and Roomets (2019). Note that subjective timing does not have to be identical to objective timing (if there is any).…”

Savage vs. Anscombe-Aumann: an experimental investigation of ambiguity frameworks

“…The two acts that highlight the differences between the two frameworks involve ambiguity hedging (see Roomets 2014, andOechssler et al 2019). These acts are akin to betting on one color when a coin flip comes up heads, and a different color when the coin flip comes up tails.…”

“…In the meantime, a number of experiments (see in particular,Dominiak andSchnedler 2011 andOechssler et al 2019) have shown that, indeed, few subjects have a strict preferences for randomization.…”

“…This was done, so that we did not need to rely on the reversal-of-order axiom (seeAnscombe and Aumann 1963). The timing of the coin toss theoretically has consequences (see, e.g.,Seo 2009;or Eichberger et al 2016), although it does not seem to matter experimentally (seeOechssler et al 2019).…”