IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-04642823.html
   My bibliography  Save this paper

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

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Johanna Etner & Meglena Jeleva & Jean‐Marc Tallon, 2012. "Decision Theory Under Ambiguity," Journal of Economic Surveys, Wiley Blackwell, vol. 26(2), pages 234-270, April.
    2. Sujoy Chakravarty & Jaideep Roy, 2009. "Recursive expected utility and the separation of attitudes towards risk and ambiguity: an experimental study," Theory and Decision, Springer, vol. 66(3), pages 199-228, March.
    3. Carmela Di Mauro & Anna Maffioletti, 2004. "Attitudes to risk and attitudes to uncertainty: experimental evidence," Applied Economics, Taylor & Francis Journals, vol. 36(4), pages 357-372.
    4. Hans P. Binswanger, 1980. "Attitudes Toward Risk: Experimental Measurement in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 395-407.
    5. Lisa Anderson & Jennifer Mellor, 2009. "Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 137-160, October.
    6. Michèle Cohen & Jean-Marc Tallon & Jean-Christophe Vergnaud, 2011. "An experimental investigation of imprecision attitude and its relation with risk attitude and impatience," Theory and Decision, Springer, vol. 71(1), pages 81-109, July.
    7. Robin M. Hogarth & Hillel J. Einhorn, 1990. "Venture Theory: A Model of Decision Weights," Management Science, INFORMS, vol. 36(7), pages 780-803, July.
    8. d’Albis, Hippolyte & Attanasi, Giuseppe & Thibault, Emmanuel, 2020. "An experimental test of the under-annuitization puzzle with smooth ambiguity and charitable giving," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 694-717.
    9. Massimo Guidolin & Francesca Rinaldi, 2013. "Ambiguity in asset pricing and portfolio choice: a review of the literature," Theory and Decision, Springer, vol. 74(2), pages 183-217, February.
    10. repec:hal:journl:hal-04476891 is not listed on IDEAS
    11. Marielle Brunette & Stéphane Couture & Kene Boun My, 2023. "Are decision-makers sensitive to the source of uncertainty ?," Post-Print hal-04174368, HAL.
    12. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    13. Arnaud Reynaud & Stéphane Couture, 2012. "Stability of risk preference measures: results from a field experiment on French farmers," Theory and Decision, Springer, vol. 73(2), pages 203-221, August.
    14. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol. 68(5), pages 1281-1292, September.
    15. Stéphane Couture & Stéphane Lemarié & Sabrina Teyssier & Pascal Toquebeuf, 2024. "The value of information under ambiguity: a theoretical and experimental study on pest management in agriculture," Theory and Decision, Springer, vol. 96(1), pages 19-47, February.
    16. Matilde Bombardini & Francesco Trebbi, 2012. "Risk Aversion And Expected Utility Theory: An Experiment With Large And Small Stakes," Journal of the European Economic Association, European Economic Association, vol. 10(6), pages 1348-1399, December.
    17. James C. Cox & Glenn W. Harrison, 2008. "Risk aversion in experiments: An introduction," Research in Experimental Economics, in: Risk Aversion in Experiments, pages 1-7, Emerald Group Publishing Limited.
    18. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    19. Johanna Etner & Meglena Jeleva & Jean‐Marc Tallon, 2012. "Decision Theory Under Ambiguity," Journal of Economic Surveys, Wiley Blackwell, vol. 26(2), pages 234-270, April.
    20. Mette Wik & Tewodros Aragie Kebede & Olvar Bergland & Stein Holden, 2004. "On the measurement of risk aversion from experimental data," Applied Economics, Taylor & Francis Journals, vol. 36(21), pages 2443-2451.
    21. Eckel, Catherine C. & Grossman, Philip J., 2008. "Men, Women and Risk Aversion: Experimental Evidence," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 113, pages 1061-1073, Elsevier.
    22. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
    23. Camerer, Colin & Weber, Martin, 1992. "Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-370, October.
    24. Al-Najjar, Nabil I. & Weinstein, Jonathan, 2009. "Rejoinder: The “Ambiguity Aversion Literature: A Critical Assessment”," Economics and Philosophy, Cambridge University Press, vol. 25(3), pages 357-369, November.
    25. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
    26. Andreas Pedroni & Renato Frey & Adrian Bruhin & Gilles Dutilh & Ralph Hertwig & Jörg Rieskamp, 2017. "The risk elicitation puzzle," Nature Human Behaviour, Nature, vol. 1(11), pages 803-809, November.
    27. Andreas C. Drichoutis & Jayson L. Lusk, 2016. "What can multiple price lists really tell us about risk preferences?," Journal of Risk and Uncertainty, Springer, vol. 53(2), pages 89-106, December.
    28. Yoram Halevy, 2007. "Ellsberg Revisited: An Experimental Study," Econometrica, Econometric Society, vol. 75(2), pages 503-536, March.
    29. Giuseppe Attanasi & Christian Gollier & Aldo Montesano & Noemi Pace, 2014. "Eliciting ambiguity aversion in unknown and in compound lotteries: a smooth ambiguity model experimental study," Theory and Decision, Springer, vol. 77(4), pages 485-530, December.
    30. Al-Najjar, Nabil I. & Weinstein, Jonathan, 2009. "The Ambiguity Aversion Literature: A Critical Assessment," Economics and Philosophy, Cambridge University Press, vol. 25(3), pages 249-284, November.
    31. Chetan Dave & Catherine Eckel & Cathleen Johnson & Christian Rojas, 2010. "Eliciting risk preferences: When is simple better?," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 219-243, December.
    32. Andersen, Steffen & Fountain, John & Harrison, Glenn W. & Rutström, Elisabet E., 2009. "Estmating Aversion to Uncertainty," Working Papers 07-2009, Copenhagen Business School, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christoph Bühren & Fabian Meier & Marco Pleßner, 2023. "Ambiguity aversion: bibliometric analysis and literature review of the last 60 years," Management Review Quarterly, Springer, vol. 73(2), pages 495-525, June.
    2. Prokosheva, Sasha, 2016. "Comparing decisions under compound risk and ambiguity: The importance of cognitive skills," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 64(C), pages 94-105.
    3. Robin Cubitt & Gijs Kuilen & Sujoy Mukerji, 2018. "The strength of sensitivity to ambiguity," Theory and Decision, Springer, vol. 85(3), pages 275-302, October.
    4. Peter John Robinson & W. J. Wouter Botzen & Fujin Zhou, 2021. "An experimental study of charity hazard: The effect of risky and ambiguous government compensation on flood insurance demand," Journal of Risk and Uncertainty, Springer, vol. 63(3), pages 275-318, December.
    5. Noemi Pace & Giuseppe Attanasi & Christian Gollier & Aldo Montesano, 2012. "Eliciting ambiguity aversion in unknown and in compound lotteries: A KMM experimental approach," Working Papers 2012_23, Department of Economics, University of Venice "Ca' Foscari".
    6. Jeffrey Butler & Luigi Guiso & Tullio Jappelli, 2014. "The role of intuition and reasoning in driving aversion to risk and ambiguity," Theory and Decision, Springer, vol. 77(4), pages 455-484, December.
    7. Camille Tevenart & Marielle Brunette, 2021. "Role of Farmers’ Risk and Ambiguity Preferences on Fertilization Decisions: An Experiment," Sustainability, MDPI, vol. 13(17), pages 1-27, August.
    8. Sasha Prokosheva, 2014. "Comparing Decisions under Compound Risk and Ambiguity: The Importance of Cognitive Skills," CERGE-EI Working Papers wp525, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    9. Aggarwal, Divya & Damodaran, Uday, 2020. "Ambiguity attitudes and myopic loss aversion: Experimental evidence using carnival games," Journal of Behavioral and Experimental Finance, Elsevier, vol. 25(C).
    10. Aurélien Baillon & Philipp Koellinger & Theresa Treffers, 2014. "Sadder but wiser: The Effects of Affective States and Weather on Ambiguity Attitudes," Tinbergen Institute Discussion Papers 14-044/I, Tinbergen Institute.
    11. Calford, Evan M., 2020. "Uncertainty aversion in game theory: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 720-734.
    12. Tamás Csermely & Alexander Rabas, 2016. "How to reveal people’s preferences: Comparing time consistency and predictive power of multiple price list risk elicitation methods," Journal of Risk and Uncertainty, Springer, vol. 53(2), pages 107-136, December.
    13. Massimo Guidolin & Francesca Rinaldi, 2013. "Ambiguity in asset pricing and portfolio choice: a review of the literature," Theory and Decision, Springer, vol. 74(2), pages 183-217, February.
    14. Holzmeister, Felix & Stefan, Matthias, 2019. "The Risk Elicitation Puzzle Revisited: Across-Methods (In)consistency?," OSF Preprints pj9u2, Center for Open Science.
    15. Ahsanuzzaman, & Priyo, Asad Karim Khan & Nuzhat, Kanti Ananta, 2022. "Effects of communication, group selection, and social learning on risk and ambiguity attitudes: Experimental evidence from Bangladesh," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    16. Felix Holzmeister & Matthias Stefan, 2019. "The risk elicitation puzzle revisited: Across-methods (in)consistency?," Working Papers 2019-19, Faculty of Economics and Statistics, Universität Innsbruck.
    17. Georgalos, Konstantinos, 2021. "Dynamic decision making under ambiguity: An experimental investigation," Games and Economic Behavior, Elsevier, vol. 127(C), pages 28-46.
    18. John D. Hey & Noemi Pace, 2018. "The explanatory and predictive power of non two-stage-probability theories of decision making under ambiguity," World Scientific Book Chapters, in: Experiments in Economics Decision Making and Markets, chapter 6, pages 139-167, World Scientific Publishing Co. Pte. Ltd..
    19. Milo Bianchi & Jean-Marc Tallon, 2019. "Ambiguity Preferences and Portfolio Choices: Evidence from the Field," Management Science, INFORMS, vol. 65(4), pages 1486-1501, April.
    20. Ihli, Hanna Julia & Chiputwa, Brian & Musshoff, Oliver, 2016. "Do Changing Probabilities or Payoffs in Lottery-Choice Experiments Affect Risk Preference Outcomes? Evidence from Rural Uganda," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(2), May.

    More about this item

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-04642823. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.