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Partial Ambiguity

Author

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  • Soo Hong Chew
  • Bin Miao
  • Songfa Zhong

Abstract

We extend Ellsberg's two‐urn paradox and propose three symmetric forms of partial ambiguity by limiting the possible compositions in a deck of 100 red and black cards in three ways. Interval ambiguity involves a symmetric range of 50 − n to 50 + n red cards. Complementarily, disjoint ambiguity arises from two nonintersecting intervals of 0 to n and 100 − n to 100 red cards. Two‐point ambiguity involves n or 100 − n red cards. We investigate experimentally attitudes towards partial ambiguity and the corresponding compound lotteries in which the possible compositions are drawn with equal objective probabilities. This yields three key findings: distinct attitudes towards the three forms of partial ambiguity, significant association across attitudes towards partial ambiguity and compound risk, and source preference between two‐point ambiguity and two‐point compound risk. Our findings help discriminate among models of ambiguity in the literature.

Suggested Citation

  • Soo Hong Chew & Bin Miao & Songfa Zhong, 2017. "Partial Ambiguity," Econometrica, Econometric Society, vol. 85, pages 1239-1260, July.
    • Handle: RePEc:wly:emetrp:v:85:y:2017:i::p:1239-1260
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    Citations

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    Cited by:

    1. Li, Wenhui & Wilde, Christian, 2020. "Belief formation and belief updating under ambiguity: Evidence from experiments," SAFE Working Paper Series 251, Leibniz Institute for Financial Research SAFE, revised 2020.
    2. Han Bleichrodt & Christophe Courbage & Béatrice Rey, 2019. "The value of a statistical life under changes in ambiguity," Journal of Risk and Uncertainty, Springer, vol. 58(1), pages 1-15, February.
    3. Larry G Epstein & Yoram Halevy, 2019. "Ambiguous Correlation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(2), pages 668-693.
    4. Roxane Bricet, 2018. "Preferences for information precision under ambiguity," THEMA Working Papers 2018-09, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    5. Garcia, Thomas & Massoni, Sébastien & Villeval, Marie Claire, 2020. "Ambiguity and excuse-driven behavior in charitable giving," European Economic Review, Elsevier, vol. 124(C).
    6. Zhihua Li & Julia Müller & Peter P. Wakker & Tong V. Wang, 2018. "The Rich Domain of Ambiguity Explored," Management Science, INFORMS, vol. 64(7), pages 3227-3240, July.
    7. Roxane Bricet, 2018. "Precise versus imprecise datasets: revisiting ambiguity attitudes in the Ellsberg paradox," THEMA Working Papers 2018-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    8. Arthur E. Attema & Han Bleichrodt & Olivier L'Haridon, 2018. "Ambiguity preferences for health," Health Economics, John Wiley & Sons, Ltd., vol. 27(11), pages 1699-1716, November.
    9. Ilke Aydogan & Loic Berger & Valentina Bosetti & Ning Liu, 2018. "Three layers of uncertainty: an experiment," Working Papers 623, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    10. Quitz'e Valenzuela-Stookey, 2020. "Subjective Complexity Under Uncertainty," Papers 2006.01852, arXiv.org, revised Oct 2022.
    11. Oechssler, Jörg & Roomets, Alex, 2015. "A test of mechanical ambiguity," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 153-162.

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