Ambiguity aversion is not universal

M.G. Kocher, Amrei Lahno, Stefan Trautmann

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Assuming universal ambiguity aversion, an extensive theoretical literature studies how ambiguity can account for market anomalies from the perspective of expected utility-based theories. We provide a systematic experimental assessment of ambiguity attitudes in different likelihood ranges, and in the gain domain, the loss domain and with mixed outcomes. We draw on a unified framework to elicit preferences across these domains. We replicate the usual finding of ambiguity aversion for moderate likelihood gains. However, when introducing losses or lower likelihoods, we observe predominantly ambiguity neutrality or seeking, rejecting universal ambiguity aversion.
Original languageEnglish
Pages (from-to)268–283
JournalEuropean Economic Review
Volume101
DOIs
Publication statusPublished - Jan 2018

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Ambiguity aversion
Expected utility
Neutrality
Market anomalies

Keywords

  • ambiguity aversion
  • decision under uncertainty
  • Ellsberg experiments

Cite this

Kocher, M.G. ; Lahno, Amrei ; Trautmann, Stefan. / Ambiguity aversion is not universal. In: European Economic Review. 2018 ; Vol. 101. pp. 268–283.
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Ambiguity aversion is not universal. / Kocher, M.G.; Lahno, Amrei; Trautmann, Stefan.

In: European Economic Review, Vol. 101, 01.2018, p. 268–283.

Research output: Contribution to journalArticleScientificpeer-review

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