Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162415
Authors: 
Schneider, Florian H.
Schonger, Martin
Year of Publication: 
2017
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 207
Abstract: 
Most models of ambiguity aversion satisfy Anscombe-Aumann's Monotonicity axiom. Monotonicity imposes separability of preferences across events that occur with unknown probability. We construct a test of Monotonicity by modifying the Allais paradox to a setting with both subjective and objective uncertainty. Two experimental studies are conducted: while study 1 uses U.S. online workers and a natural source of ambiguity, study 2 employs European students and an Ellsberg urn. In both studies, modal behavior violates Monotonicity in a specific, intuitive way. Overall, our data suggest that violations of Monotonicity are as prevalent as violations of von Neumann-Morgenstern's Independence axiom.
Subjects: 
Ambiguity aversion
monotonicity
Anscombe-Aumann
Allais paradox
experiments
JEL: 
D81
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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