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Are ambiguity preferences aligned with risk preferences?

Author

Listed:
  • Kene Boun My

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Marielle Brunette

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Stéphane Couture

    (MIAT INRAE - Unité de Mathématiques et Informatique Appliquées de Toulouse - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Sarah van Driessche

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Decisions under risk and ambiguity are frequently encountered in our daily lives, and the associated preferences are often quantified. This article deals with the relationship between individuals' preferences towards risk and ambiguity. In particular, we question the correlation of the preferences and their alignment. For that purpose, we analyze experimental data that measures individuals' risk and ambiguity preferences through a lottery choice experiment. The results indicate that most of the subjects are risk-loving and ambiguity-averse. We also show that risk preferences and ambiguity preferences are negatively correlated. Finally, we prove that the majority of subjects have preferences towards ambiguity that are aligned with those towards risk, either perfectly or weakly. Thirty-four percent of the sample has preferences towards ambiguity that are the opposite of those towards risk.

Suggested Citation

  • Kene Boun My & Marielle Brunette & Stéphane Couture & Sarah van Driessche, 2024. "Are ambiguity preferences aligned with risk preferences?," Post-Print hal-04642823, HAL.
    • Handle: RePEc:hal:journl:hal-04642823
    DOI: 10.1016/j.socec.2024.102237
    as

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    Keywords

    Risk; Uncertainty; Ambiguity; Preferences; Experiments;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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