Is Ellsberg Behavior Evidence of Ambiguity Aversion?

33 Pages Posted: 17 Aug 2019 Last revised: 15 Oct 2020

See all articles by Christoph Kuzmics

Christoph Kuzmics

University of Graz - Department of Economics

Brian Rogers

Washington University in St. Louis

Xiannong Zhang

Washington University in St. Louis

Date Written: October 13, 2020

Abstract

We design and implement lab experiments, as close as possible to the Ellsberg two-color urn experiment, to evaluate the positive and normative appeal of behavior arising from models of ambiguity-averse preferences. We report three main empirical findings: First, these preference models do not explain behavior any better than subjective expected utility. Second, subjects do not act on the basis of preferences alone. Third, additional clarification of the decision making environment pushes subjects' choices in the direction of ambiguity aversion models, regardless of whether or not this is also consistent with subjective expected utility.

Keywords: Knightian uncertainty, subjective expected utility, ambiguity aversion, lab experiment

JEL Classification: C91, D81

Suggested Citation

Kuzmics, Christoph and Rogers, Brian and Zhang, Xiannong, Is Ellsberg Behavior Evidence of Ambiguity Aversion? (October 13, 2020). Available at SSRN: https://ssrn.com/abstract=3437331 or http://dx.doi.org/10.2139/ssrn.3437331

Christoph Kuzmics (Contact Author)

University of Graz - Department of Economics ( email )

Universitaetsstrasse 15
RESOWI - F4
Graz, 8010
Austria

Brian Rogers

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Xiannong Zhang

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

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