Sampling experience reverses preferences for ambiguity

Research output: Contribution to journalArticleScientificpeer-review

Abstract

People often need to choose between alternatives with known probabilities (risk) and alternatives with unknown probabilities (ambiguity). Such decisions are characterized by attitudes towards ambiguity, which are distinct from risk attitudes. Most studies of ambiguity attitudes have focused on the static case of single choice, where decision makers typically prefer risky over ambiguous prospects. However, in many situations, decision makers may be able to sample outcomes of an ambiguous alternative, allowing for inferences about its probabilities. The current paper finds that such sampling experience reverses the pattern of ambiguity attitude observed in the static case. This effect can only partly be explained by the updating of probabilistic beliefs, suggesting a direct effect of sampling on attitudes toward ambiguity.
Original languageEnglish
Pages (from-to)31-42
JournalJournal of Risk and Uncertainty
Volume49
Issue number1
DOIs
Publication statusPublished - Aug 2014

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Sampling
Decision maker
Risk attitude
Direct effect
Inference

Keywords

  • ambiguity aversion
  • decisions from experience
  • sampling
  • probability estimates

Cite this

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title = "Sampling experience reverses preferences for ambiguity",
abstract = "People often need to choose between alternatives with known probabilities (risk) and alternatives with unknown probabilities (ambiguity). Such decisions are characterized by attitudes towards ambiguity, which are distinct from risk attitudes. Most studies of ambiguity attitudes have focused on the static case of single choice, where decision makers typically prefer risky over ambiguous prospects. However, in many situations, decision makers may be able to sample outcomes of an ambiguous alternative, allowing for inferences about its probabilities. The current paper finds that such sampling experience reverses the pattern of ambiguity attitude observed in the static case. This effect can only partly be explained by the updating of probabilistic beliefs, suggesting a direct effect of sampling on attitudes toward ambiguity.",
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author = "E. Ert and S.T. Trautmann",
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Sampling experience reverses preferences for ambiguity. / Ert, E.; Trautmann, S.T.

In: Journal of Risk and Uncertainty, Vol. 49, No. 1, 08.2014, p. 31-42.

Research output: Contribution to journalArticleScientificpeer-review

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AU - Ert, E.

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AB - People often need to choose between alternatives with known probabilities (risk) and alternatives with unknown probabilities (ambiguity). Such decisions are characterized by attitudes towards ambiguity, which are distinct from risk attitudes. Most studies of ambiguity attitudes have focused on the static case of single choice, where decision makers typically prefer risky over ambiguous prospects. However, in many situations, decision makers may be able to sample outcomes of an ambiguous alternative, allowing for inferences about its probabilities. The current paper finds that such sampling experience reverses the pattern of ambiguity attitude observed in the static case. This effect can only partly be explained by the updating of probabilistic beliefs, suggesting a direct effect of sampling on attitudes toward ambiguity.

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