The Strength of Sensitivity to Ambiguity

Gijs van de Kuilen, Robin Cubitt, Sujoy Mukerji

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We report an experiment where each subject’s ambiguity sensitivity is measured by an ambiguity premium, a concept analogous to and comparable with a risk premium. In our design, some tasks feature known objective risks and others uncertainty about which subjects have imperfect, heterogeneous, information (“ambiguous tasks”). We show how the smooth ambiguity model can be used to calculate ambiguity premia. A distinctive feature of our approach is estimation of each subject’s subjective beliefs about the uncertainty in ambiguous tasks. We find considerable heterogeneity among subjects in beliefs and ambiguity premia; and that, on average, ambiguity sensitivity is about as strong as risk sensitivity.
Original languageEnglish
Pages (from-to)275-302
JournalTheory and Decision
Volume85
Issue number3-4
DOIs
Publication statusPublished - Oct 2018

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premium
uncertainty
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Keywords

  • ambiguity sensitivity
  • ambiguity attitude
  • measuring strength of ambiguity sensitivity
  • smooth ambiguity model
  • ambiguity premium

Cite this

van de Kuilen, Gijs ; Cubitt, Robin ; Mukerji, Sujoy. / The Strength of Sensitivity to Ambiguity. In: Theory and Decision. 2018 ; Vol. 85, No. 3-4. pp. 275-302.
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The Strength of Sensitivity to Ambiguity. / van de Kuilen, Gijs; Cubitt, Robin; Mukerji, Sujoy.

In: Theory and Decision, Vol. 85, No. 3-4, 10.2018, p. 275-302.

Research output: Contribution to journalArticleScientificpeer-review

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