Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127342
Authors: 
Eichberger, Jürgen
Oechssler, Jörg
Schnedler, Wendelin
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper Series, University of Heidelberg, Department of Economics 528
Abstract: 
As illustrated by the famous Ellsberg paradox, many subjects prefer to bet on events with known rather than with unknown probabilities, i.e., they are ambiguity averse. In an experiment, we examine subjects’ choices when there is an additional source of ambiguity, namely, when they do not know how much money they can win. Using a standard independence assumption, we show that ambiguity averse subjects should continue to strictly prefer the urn with known probabilities. In contrast, our results show that many subjects no longer exhibit such a strict preference. This should have important ramifications for modeling ambiguity aversion.
Subjects: 
ambiguity aversion
uncertainty
minmax-expected utility
JEL: 
D81
C91
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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