Recursive expected utility and the separation of attitudes towards risk and ambiguity: an experimental study

Chakravarty, Sujoy; Roy, Jaideep

doi:10.1007/s11238-008-9112-4

Cited by 97 publications

(77 citation statements)

References 29 publications

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“…Our finding that attitudes toward risk and ambiguity in the gain domain do not develop in the same way across the life span could suggest that risk and ambiguity are mechanistically independent. We found, however, that risk and ambiguity attitudes were slightly correlated in the gain domain (Pearson's correlation coefficient = 0.301, P < 0.001) but not in the loss domain (Pearson's correlation coefficient = −0.167, P = 0.0531), as has been previously shown (32). This correlation in the gain domain is insignificant in our small population when each age group is analyzed separately, except for midlife adults (Pearson's correlation coefficient = 0.362, P = 0.042), and is weakest in adolescents (Pearson's correlation coefficient = 0.288, P = 0.104).…”

Section: Significancesupporting

confidence: 74%

“…Lauriola and Levin (40), for example, found that attitudes toward risk and ambiguity are correlated, whereas Levy et al (41) and Cohen et al (23) did not find any correlation between risk and ambiguity attitudes. To take another example, Chakravarty and Roy (32) concluded that the correlation is domain-specific. Although it now seems clear that no one study can resolve this relationship, our findings are in line with those of Chakravarty and Roy (32).…”

Section: Discussionmentioning

confidence: 99%

“…To take another example, Chakravarty and Roy (32) concluded that the correlation is domain-specific. Although it now seems clear that no one study can resolve this relationship, our findings are in line with those of Chakravarty and Roy (32). Additionally, we find that the link between individual risk and ambiguity attitudes in the gain domain, although relatively weak, gets stronger as people age.…”

Section: Discussionmentioning

confidence: 99%

See 2 more Smart Citations

Like cognitive function, decision making across the life span shows profound age-related changes

Tymula

Belmaker²,

Ruderman³

et al. 2013

Proc. Natl. Acad. Sci. U.S.A.

262

278

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Significance Although largely unstudied, behavioral changes in decision making across the life span have implications for problems associated with poor decision making at different life stages, such as careless driving in adolescents and disadvantageous medical or financial decision making in older adults. We examine age-based differences in individual decision-making characteristics—choice consistency, rationality, and preferences for known and unknown risks—in 12- to 90-y-olds. We found that even the healthiest of elders show profoundly compromised decision making, and that risk attitudes show systematic changes across the life span that have important policy implications.

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Section: Significancesupporting

confidence: 74%

Section: Discussionmentioning

confidence: 99%

Section: Discussionmentioning

confidence: 99%

See 1 more Smart Citation

Like cognitive function, decision making across the life span shows profound age-related changes

Tymula

Belmaker²,

Ruderman³

et al. 2013

Proc. Natl. Acad. Sci. U.S.A.

262

278

View full text Add to dashboard Cite

show abstract

“…Chakravarty and Roy (2009) is one of them. They have tried to separate attitude toward risk from that toward ambiguity using the multiple price list method as the only experimental instrument.…”

Section: Discriminating Between Theories Versus Operationalizing One mentioning

confidence: 99%

Eliciting ambiguity aversion in unknown and in compound lotteries: a smooth ambiguity model experimental study

et al. 2014

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Coherent-ambiguity aversion is defined within the (Klibanoff et al., Econometrica 73:1849Econometrica 73: -1892Econometrica 73: , 2005) smooth-ambiguity model (henceforth KMM) as the combination of choice-ambiguity and value-ambiguity aversion. Five ambiguous decision tasks are analyzed theoretically, where an individual faces two-stage lotteries with binomial, uniform, or unknown second-order probabilities. Theoretical predictions are then tested through a 10-task experiment. In (unambiguous) tasks 1-5, risk aversion is elicited through both a portfolio choice method and a BDM mechanism. In (ambiguous) tasks 6-10, choice-ambiguity aversion is elicited through the portfolio choice method, while value-ambiguity aversion comes about through the BDM mechanism. The behavior of over 75 % of classified subjects is in line with the KMM model in all tasks 6-10, independent of their degree of risk aversion. Furthermore, the percentage of coherent-ambiguity-averse subjects is lower in the binomial than in the uniform and in the unknown treatments, with only the latter difference being significant. The most part of coherent-ambiguity-loving subjects show a high risk aversion.

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“…In the context of model uncertainty, risk sensitivity can be distinguished from risk attitudes modelled by the curvature of the utility function, both theoretically and experimentally [45,46]. Utility functions generally express the subjective desirability of an outcome and not necessarily its nominal value.…”

Section: Discussionmentioning

confidence: 99%

The effect of model uncertainty on cooperation in sensorimotor interactions

Grau-Moya

Hez

Pezzulo³

et al. 2013

J. R. Soc. Interface.

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Decision-makers have been shown to rely on probabilistic models for perception and action. However, these models can be incorrect or partially wrong in which case the decision-maker has to cope with model uncertainty. Model uncertainty has recently also been shown to be an important determinant of sensorimotor behaviour in humans that can lead to risk-sensitive deviations from Bayes optimal behaviour towards worst-case or best-case outcomes. Here, we investigate the effect of model uncertainty on cooperation in sensorimotor interactions similar to the stag-hunt game, where players develop models about the other player and decide between a pay-off-dominant cooperative solution and a risk-dominant, non-cooperative solution. In simulations, we show that players who allow for optimistic deviations from their opponent model are much more likely to converge to cooperative outcomes. We also implemented this agent model in a virtual reality environment, and let human subjects play against a virtual player. In this game, subjects' pay-offs were experienced as forces opposing their movements. During the experiment, we manipulated the risk sensitivity of the computer player and observed human responses. We found not only that humans adaptively changed their level of cooperation depending on the risk sensitivity of the computer player but also that their initial play exhibited characteristic risksensitive biases. Our results suggest that model uncertainty is an important determinant of cooperation in two-player sensorimotor interactions.

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Recursive expected utility and the separation of attitudes towards risk and ambiguity: an experimental study

Abstract: Recursive expected utility, Risk, Ambiguity, C9, C44, C91,

Cited by 97 publications

References 29 publications

Like cognitive function, decision making across the life span shows profound age-related changes

Like cognitive function, decision making across the life span shows profound age-related changes

Eliciting ambiguity aversion in unknown and in compound lotteries: a smooth ambiguity model experimental study

The effect of model uncertainty on cooperation in sensorimotor interactions

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