Abstract
The exchange between Epstein (2010) and Klibanoff et al. (2012) identified a behavioral issue that sharply distinguishes between two classes of models of ambiguity sensitivity, exemplified by the 훼- MEU model and the smooth ambiguity model, respectively. The issue in question is whether a subject’s preference for a randomized act (compared to its pure constituents) is influenced by a desire to hedge independently resolving ambiguities. Building on this insight, we implement an experiment whose design provides a qualitative test that discriminates between these importantly distinct classes
of models. Among subjects identified as ambiguity sensitive, we find greater support for the class exemplified by the smooth ambiguity model; the relative support is stronger among subjects identified as ambiguity averse.
of models. Among subjects identified as ambiguity sensitive, we find greater support for the class exemplified by the smooth ambiguity model; the relative support is stronger among subjects identified as ambiguity averse.
Original language | English |
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Place of Publication | Oxford |
Publisher | University of Oxford |
Number of pages | 42 |
Publication status | Published - Jan 2014 |
Publication series
Name | Discussion Paper Series |
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Volume | 692 |