Is Ellsberg Behavior Evidence of Ambiguity Aversion?

Abstract

We perform two types of lab experiments to assess the normative and positive appeal of preference models exhibiting ambiguity aversion. Our first experiment is a simple extension of the Ellsberg [1961] two-color urn experiment in which there is an option that hedges ambiguity away completely and that dominates the options that correspond to Ellsberg behavior. 63% of subjects choose the dominated Ellsberg options, which compares similarly to the proportion of subjects choosing the risky urn in the standard two-color experiment. While subjective expected utility cannot explain this choice, also none of the classical models of ambiguity aversion can explain this choice. Our second experiment is also based on the Ellsberg two-color urn experiment. In this experiment, in various treatments, we provide advice in the form of short video clips in favor of, as well as against, the Ellsberg choice. We find suggestive, but not conclusive, evidence that subjects' choices are influenced by advice and, in these cases, mostly in the direction of abandoning the Ellsberg option.

Cognitive modeling for understanding interactions between people and decision support tools in complex and uncertain environments: A study protocol

“…The Ellsberg paradox is an experimental challenge where participants make decisions about a possible outcome based on the probability of an event occurring [ 14 ]. This paradox is frequently used in decision-making theory [ 15 , 16 ]and has modulations in terms of ambiguity (amount of information offered to the decision-maker) and uncertainty (random result).…”

“…The electrode positions are organized as follows: frontal (F) left (F3), right (F4), center (Fz); centrotemporal (CT) left (C3), right (C4), center (Cz); parietotemporal (PT) left (P3), right (P4); and parietooccipital center (PO) (POz). The EEG signal represents a wide range of frequencies commonly divided into different frequency bands, such as the alpha band (8-13 Hz) and the beta band (13)(14)(15)(16)(17)(18)(19)(20)(21)(22)(23)(24)(25)(26)(27)(28)(29)(30).…”

A general theory of subjective mixtures

“…DMs may display ambiguity aversion while violating it. (Recent experimental evidence on this is provided by Kuzmics, Rogers, and Zhang (2019), who find subjects that strictly prefer act f (or g ) to an act which in their setting reproduces the 1/2:1/2 subjective mixture of f and g . )…”