Ambiguity aversion in a delay analogue of the Ellsberg Paradox
Journal Title: Judgment and Decision Making - Year 2012, Vol 7, Issue 4
Abstract
Decision makers are often ambiguity averse, preferring options with subjectively known probabilities to options with unknown probabilities. The Ellsberg paradox is the best-known example of this phenomenon. Ambiguity has generally been studied in the domain of risky choice, and many theories of ambiguity aversion deal with ambiguity only in this context. However, ambiguity aversion may occur in other contexts. In the present experiment, we examine the effects of ambiguity in intertemporal choice. Subjects imagine they are expecting a package and must choose between two delivery options. Some delivery times are exact. Others are ambiguous, with delivery possible over a range of dates. This problem was structurally identical to the Ellsberg paradox. Subjects showed the same pattern of responses as in the traditional Ellsberg paradox, with each delivery service preferred when it was the unambiguous option. Ambiguity aversion is not specific to risk, but can also occur in other domains.
Authors and Affiliations
Bethany J. Weber and Wah Pheow Tan
Keywords
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