Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282433 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10745
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We conduct an incentivized experiment on a nationally representative US sample (N=708) to test whether people prefer to avoid ambiguity even when it means choosing dominated options. In contrast to the literature, we find that 55% of subjects prefer a risky act to an ambiguous act that always provides a larger probability of winning. Our experimental design shows that such a preference is not mainly due to a lack of understanding. We conclude that subjects avoid ambiguity per se rather than avoiding ambiguity because it may yield a worse outcome. Such behavior cannot be reconciled with existing models of ambiguity aversion in a straightforward manner.
Subjects: 
uncertainty
complexity
ambiguity
decision-making
Document Type: 
Working Paper
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