Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282433.2 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 10745
Version Description: 
This Version: Mai 2025
Publisher: 
CESifo GmbH, Munich
Abstract: 
We introduce a novel experimental framework, the two-ball Ellsberg gamble, which allows us to explore a wider range of possible drivers of ambiguity attitudes than usually considered by the literature. In an incentivized experiment on a representative sample from the US with 708 participants, we find that 55% of the subjects prefer avoiding ambiguity even when it means choosing dominated risky options - what we call the Two-Ball Ellsberg Paradox. This aversion to mere exposure to ambiguity violates the monotonicity axiom of most current ambiguity models. In a series of treatments, we establish that the primary drivers of these behaviors are an aversion to complexity generated by the presence of ambiguity. Such a complexity aversion explains about 43% of the variations in the two-ball Ellsberg and 38% of the variations in the original Ellsberg paradox. We further explore the possible different cognitive foundations underlying such a result. Participants who are more likely to display the Two-Ball Ellsberg Paradox are also more likely to perceive the setting as complex.
Subjects: 
uncertainty
complexity
ambiguity
decision-making
Document Type: 
Working Paper
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2 10419/282433.2 Revised Version: Mai 2025
1 10419/282433 Original Version: December 2022

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