Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/184782
Authors: 
Cubitt, Robin
van de Kuilen, Gijs
Mukerji, Sujoy
Year of Publication: 
2017
Series/Report no.: 
Working Paper 831
Abstract: 
During recent decades, many new models have emerged in pure and applied economic theory according between Epstein (2010) and Klibanoff et al. (2012) identified a notable behavioral issue that distinguishes sharply between two classes of models of ambiguity sensitivity that are importantly different. The two classes are exemplified by the -MEU model and the smooth ambiguity model, respectively; and the issue is whether or not a desire to hedge independently resolving ambiguities contributes to an ambiguity averse preference for a randomized act. Building on this insight, we implement an experiment whose design provides a qualitative test that discriminates between the two classes of models. Among subjects identified as ambiguity sensitive, we find greater support for the class exemplified by the smooth ambiguity model; the relative support is stronger among subjects identified as ambiguity averse. This finding has implications for applications which rely on specific models of ambiguity preference.
Subjects: 
Ambiguity sensitivity
ambiguity attitude
testing models of ambiguity sensitive preference
JEL: 
C91
D01
D03
D81
G02
Document Type: 
Working Paper
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