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How much ambiguity aversion?: finding indifferences between Ellsberg's risky and ambiguous bets

Binmore, Ken, Stewart, Lisa and Voorhoeve, Alex (2012) How much ambiguity aversion?: finding indifferences between Ellsberg's risky and ambiguous bets. Journal of Risk and Uncertainty, 45 (3). pp. 215-238. ISSN 0895-5646

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Abstract

Experimental results on the Ellsberg paradox typically reveal behavior that is commonly interpreted as ambiguity aversion. The experiments reported in the current paper find the objective probabilities for drawing a red ball that make subjects indifferent between various risky and uncertain Ellsberg bets. They allow us to examine the predictive power of alternative principles of choice under uncertainty, including the objective maximin and Hurwicz criteria, the sure-thing principle, and the principle of insufficient reason. Contrary to our expectations, the principle of insufficient reason performed substantially better than rival theories in our experiment, with ambiguity aversion appearing only as a secondary phenomenon.

Item Type: Article
Official URL: http://www.springer.com/economics/economic+theory/...
Additional Information: © 2012 Springer Science + Business Media New York
Library of Congress subject classification: B Philosophy. Psychology. Religion > B Philosophy (General)
Sets: Departments > Philosophy, Logic and Scientific Method
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 11 Sep 2012 15:43
URL: http://eprints.lse.ac.uk/45808/

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