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Disentangling Drivers of Ambiguity Attitudes

Author

Listed:
  • Mohammed Abdellaoui

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Brian Hill

    (CNRS - Centre National de la Recherche Scientifique, HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Sarat Chandra Akella

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

Abstract

A popular framework for ambiguity represents alternatives of choice as twostage gambles reflecting the uncertainty about the true probability on the state space. In this framework, ambiguity-averse behaviour could be driven by differences in utilities between stages-as in the smooth ambiguity model (Klibanoff et al., 2005)-or by non-linear probability weighting-as in a line of research initiated by Segal (1987). The present paper investigates the relevance of these distinct drivers of ambiguity attitudes in a two-stage setup by estimating a generalization of the smooth ambiguity model incorporating probability weighting. Our experiment reveals the relevance of both factors to describing ambiguity attitudes. We also report evidence of stakes-dependence of ambiguity attitudes, as implied by utility-driven approaches.

Suggested Citation

  • Mohammed Abdellaoui & Brian Hill & Sarat Chandra Akella, 2024. "Disentangling Drivers of Ambiguity Attitudes ," Working Papers hal-04759303, HAL.
    • Handle: RePEc:hal:wpaper:hal-04759303
    DOI: 10.2139/ssrn.4916177
    as

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