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Learning under ambiguity: An experiment in gradual information processing

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  • Kathleen Ngangoué, M.

Abstract

This experiment studies belief updating under ambiguity, using subjects' bid and ask prices for an asset with ambiguous payoff distribution. Bid and ask quotes allow for distinguishing between the two main paradigms of updating under ambiguity–full Bayesian updating and maximum likelihood updating. We find substantial heterogeneity in subjects' reaction to information. The majority of subjects (54%) chose quotes that were in line with full Bayesian updating, while another, non-negligible, group (35%) behaved like maximum likelihood updaters.

Suggested Citation

  • Kathleen Ngangoué, M., 2021. "Learning under ambiguity: An experiment in gradual information processing," Journal of Economic Theory, Elsevier, vol. 195(C).
    • Handle: RePEc:eee:jetheo:v:195:y:2021:i:c:s0022053121000995
    DOI: 10.1016/j.jet.2021.105282
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    Cited by:

    1. Aljoscha Minnich & Hauke Roggenkamp & Andreas Lange, 2023. "Ambiguity Attitudes and Surprises: Experimental Evidence on Communicating New Information within a Large Population Sample," CESifo Working Paper Series 10783, CESifo.

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    More about this item

    Keywords

    Learning; Ambiguity; Experiment; Maximum likelihood updating; Full Bayesian updating;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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