Abstract
Original language | English |
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Article number | jvz005 |
Journal | Journal of the European Economic Association |
DOIs | |
Publication status | E-pub ahead of print - Apr 2019 |
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Discriminating between models of ambiguity attitude : A qualitative test. / Cubitt, Robin; van de Kuilen, Gijs; Mukerji, Sujoy.
In: Journal of the European Economic Association, 04.2019.Research output: Contribution to journal › Article › Scientific › peer-review
TY - JOUR
T1 - Discriminating between models of ambiguity attitude
T2 - A qualitative test
AU - Cubitt, Robin
AU - van de Kuilen, Gijs
AU - Mukerji, Sujoy
PY - 2019/4
Y1 - 2019/4
N2 - During recent decades, many new models have emerged in pure and applied economic theory according to which agents’ choices may be sensitive to ambiguity in the uncertainty that faces them. The exchange between Epstein (2010) and Klibanoff et al. (2012) identified a notable behavioral issue that distinguishes sharply between two classes of models of ambiguity sensitivity that are importantly different. The two classes are exemplified by the α-maxmin expected utility (MEU) model and the smooth ambiguity model, respectively; and the issue is whether or not a desire to hedge independently resolving ambiguities contributes to an ambiguity-averse agent's preference for a randomized act. Building on this insight, we implement an experiment whose design provides a qualitative test that discriminates between the two 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. This finding has implications for applications that rely on specific models of ambiguity preference.
AB - During recent decades, many new models have emerged in pure and applied economic theory according to which agents’ choices may be sensitive to ambiguity in the uncertainty that faces them. The exchange between Epstein (2010) and Klibanoff et al. (2012) identified a notable behavioral issue that distinguishes sharply between two classes of models of ambiguity sensitivity that are importantly different. The two classes are exemplified by the α-maxmin expected utility (MEU) model and the smooth ambiguity model, respectively; and the issue is whether or not a desire to hedge independently resolving ambiguities contributes to an ambiguity-averse agent's preference for a randomized act. Building on this insight, we implement an experiment whose design provides a qualitative test that discriminates between the two 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. This finding has implications for applications that rely on specific models of ambiguity preference.
U2 - 10.1093/jeea/jvz005
DO - 10.1093/jeea/jvz005
M3 - Article
JO - Journal of the European Economic Association
JF - Journal of the European Economic Association
SN - 1542-4774
M1 - jvz005
ER -