Theory and Decision

, Volume 60, Issue 2–3, pp 257–282 | Cite as

An Experimental Test of Generalized Ambiguity Aversion using Lottery Pricing Tasks

Article

Abstract

We report the results of an experiment which investigates the impact of the manner in which likelihood information is presented to decision-makers on valuations assigned to lotteries. We find that subjects who observe representative sequences of outcomes attach higher valuations to lotteries than those who are given only a verbal description of a probability distribution. We interpret this in terms of a reduction in ambiguity about the possible lottery outcomes. These findings suggest that ambiguity aversion may be a confounding factor in reported experimental violations of expected utility theory based on verbal descriptions of probability distributions.

Keywords

ambiguity probability learning competence and comprehension hypotheses experiment lottery valuations 

Jel classification

D81 C91 

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Copyright information

© Springer 2006

Authors and Affiliations

  1. 1.Centre for Decision Research and Experimental Economics, School of EconomicsUniversity of NottinghamNottinghamUK

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