Article

Theory and Decision

, Volume 69, Issue 3, pp 375-393

Betting on Machina’s reflection example: an experiment on ambiguity

  • Olivier L’HaridonAffiliated withGreg-Hec & University Paris Sorbonne Email author 
  • , Lætitia PlacidoAffiliated withGreg-Hec & CNRS, HEC Paris School of Management

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Abstract

In a recent article, Machina (Am Econ Rev forthcoming, 2008) suggested choice problems in the spirit of Ellsberg (Q J Econ 75:643–669, 1961), which challenge tail-separability, an implication of Choquet expected utility (CEU), to a similar extent as the Ellsberg paradox challenged the sure-thing principle implied by subjective expected utility (SEU). We have tested choice behavior for bets on one of Machina’s choice problems, the reflection example. Our results indicate that tail-separability is violated by a large majority of subjects (over 70% of the sample). These empirical findings complement the theoretical analysis of Machina (Am Econ Rev forthcoming, 2008) and, together, they confirm the need for new approaches in the analysis of ambiguity for decision making.

Keywords

Ambiguity Choquet expected utility Experimental economics

JEL Classification

C90 D81