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Randomization advice and ambiguity aversion

Author

Listed:
  • Christoph Kuzmics

    (University of Graz)

  • Brian W. Rogers

    (Washington University in St. Louis)

  • Xiannong Zhang

    (Google LLC)

Abstract

We design and implement lab experiments to evaluate the normative appeal of behavior arising from models of ambiguity-averse preferences. We report two main empirical findings. First, we demonstrate that behavior reflects an incomplete understanding of the problem, providing evidence that subjects do not act on the basis of preferences alone. Second, additional clarification of the decision making environment pushes subjects’ choices in the direction of ambiguity aversion models, regardless of whether or not the choices are also consistent with subjective expected utility, supporting the position that subjects find such behavior normatively appealing.

Suggested Citation

  • Christoph Kuzmics & Brian W. Rogers & Xiannong Zhang, 2024. "Randomization advice and ambiguity aversion," Journal of Risk and Uncertainty, Springer, vol. 69(1), pages 85-104, August.
    • Handle: RePEc:kap:jrisku:v:69:y:2024:i:1:d:10.1007_s11166-024-09436-4
    DOI: 10.1007/s11166-024-09436-4
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    More about this item

    Keywords

    Knightian uncertainty; Subjective expected utility; Ambiguity aversion; Lab experiment;
    All these keywords.

    JEL classification:

    • 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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