Discriminating Between Models of Ambiguity Attitude: A Qualitative Test

Robin Cubitt, Gijs van de Kuilen, Sujoy Mukerji

Research output: Working paperDiscussion paperOther research output

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.
Original languageEnglish
Place of PublicationOxford
PublisherUniversity of Oxford
Number of pages42
Publication statusPublished - Jan 2014

Publication series

NameDiscussion Paper Series
Volume692

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