Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/142311 
Year of Publication: 
2016
Series/Report no.: 
Nota di Lavoro No. 37.2016
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
Abstract: 
The results of an experiment extending Ellsberg's setup demonstrate that attitudes towards ambiguity and compound uncertainty are closely related. However, this association is much stronger when the second layer of uncertainty is subjective than when it is objective. Provided that the compound probabilities are simple enough, we find that most subjects, consisting of both students and policy makers, (1) reduce compound objective probabilities, (2) do not reduce compound subjective probabilities, and (3) are ambiguity non-neutral. By decomposing ambiguity into risk and model uncertainty, and jointly eliciting the attitudes individuals manifest towards these two types of uncertainty, we characterize individuals' degree of ambiguity aversion. Our data provides evidence of decreasing absolute ambiguity aversion and constant relative ambiguity aversion.
Subjects: 
Ambiguity Aversion
Model Uncertainty
Reduction of Compound Lotteries
Non-expected Utility
Subjective Probabilities
Decreasing Absolute Ambiguity Aversion
JEL: 
D81
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.