An Experimental Test of Generalized Ambiguity Aversion using Lottery Pricing Tasks
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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.
Keywordsambiguity probability learning competence and comprehension hypotheses experiment lottery valuations
Jel classificationD81 C91
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