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An experimental test of the Anscombe-Aumann Monotonicity axiom

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  • Florian Schneider
  • Martin Schonger

Abstract

Most models of ambiguity aversion satisfy Anscombe-Aumann’s Monotonicity axiom. Monotonicity imposes separability of preferences across events that occur with unknown probability. We construct a test of Monotonicity by modifying the Allais paradox to a setting with both subjective and objective uncertainty. Two experimental studies are conducted: while study 1 uses U.S. online workers and a natural source of ambiguity, study 2 employs European students and an Ellsberg urn. In both studies, modal behavior violates Monotonicity in a specific, intuitive way. Overall, our data suggest that violations of Monotonicity are as prevalent as violations of von Neumann-Morgenstern’s Independence axiom.

Suggested Citation

  • Florian Schneider & Martin Schonger, 2015. "An experimental test of the Anscombe-Aumann Monotonicity axiom," ECON - Working Papers 207, Department of Economics - University of Zurich, revised May 2017.
    • Handle: RePEc:zur:econwp:207
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    2. Stefan Trautmann & Peter P. Wakker, 2018. "Making the Anscombe-Aumann approach to ambiguity suitable for descriptive applications," Journal of Risk and Uncertainty, Springer, vol. 56(1), pages 83-116, February.

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    More about this item

    Keywords

    Ambiguity aversion; monotonicity; Anscombe-Aumann; Allais paradox; experiments;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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