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Measuring Beliefs Under Ambiguity

Author

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  • Mohammed Abdellaoui

    (Department of Economics and Decision Sciences, GREGHEC-CNRS, HEC-Paris, 78350 Jouy-en-Josas, France;)

  • Han Bleichrodt

    (Erasmus School of Economics, 3062 PA Rotterdam, Netherlands; Research School of Economics, Australian National University, Canberra, ACT 2601, Australia;)

  • Emmanuel Kemel

    (Department of Economics and Decision Sciences, GREGHEC-CNRS, HEC-Paris, 78350 Jouy-en-Josas, France;)

  • Olivier l’Haridon

    (Univ Rennes, CNRS, CREM UMR 6211, F-35000 Rennes, France)

Abstract

This paper presents a simple method to measure the beliefs of a decision-maker with nonneutral ambiguity attitudes. Our method requires three simple choices, is incentive compatible, and allows for risk aversion and deviations from expected utility, including probability weighting and ambiguity aversion. An experiment using two natural sources of uncertainty (the temperature in Rotterdam and in New York City) shows that the model’s estimated beliefs are well calibrated, sensitive to the source of uncertainty, and similar to beliefs estimated by more sophisticated but time-consuming methods.

Suggested Citation

  • Mohammed Abdellaoui & Han Bleichrodt & Emmanuel Kemel & Olivier l’Haridon, 2021. "Measuring Beliefs Under Ambiguity," Operations Research, INFORMS, vol. 69(2), pages 599-612, March.
    • Handle: RePEc:inm:oropre:v:69:y:2021:i:2:p:599-612
    DOI: 10.1287/opre.2020.1980
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    2. Kpegli, Yao Thibaut & Corgnet, Brice & Zylbersztejn, Adam, 2023. "All at once! A comprehensive and tractable semi-parametric method to elicit prospect theory components," Journal of Mathematical Economics, Elsevier, vol. 104(C).
    3. Wei Wang & Huifu Xu, 2023. "Preference robust distortion risk measure and its application," Mathematical Finance, Wiley Blackwell, vol. 33(2), pages 389-434, April.
    4. Kim, Hwa-Sung, 2021. "Risk management and optimal capital structure under ambiguity," Finance Research Letters, Elsevier, vol. 40(C).
    5. Cédric Gutierrez & Emmanuel Kemel, 2024. "Measuring natural source dependence," Experimental Economics, Springer;Economic Science Association, vol. 27(2), pages 379-416, April.
    6. Cédric Gutierrez & Emmanuel Kemel, 2021. "Measuring natural source dependence," Working Papers hal-03330409, HAL.
    7. Li, Zheng & Hensher, David A. & Zeng, Jingjing, 2022. "Travel choice behaviour under uncertainty in real-market settings: A source-dependent utility approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 168(C).
    8. Cosmin L. Ilut & Martin Schneider, 2022. "Modeling Uncertainty as Ambiguity: a Review," NBER Working Papers 29915, National Bureau of Economic Research, Inc.
    9. Li, Chen & Turmunkh, Uyanga & Wakker, Peter P., 2020. "Social and strategic ambiguity versus betrayal aversion," Games and Economic Behavior, Elsevier, vol. 123(C), pages 272-287.
    10. Mohammed Abdellaoui & Han Bleichrodt & Cédric Gutierrez, 2023. "Unpacking Overconfident Behavior When Betting on Oneself," Post-Print hal-04383402, HAL.

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    Keywords

    belief measurement; ambiguity;

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