Theory and Decision

, Volume 77, Issue 4, pp 455–484 | Cite as

The role of intuition and reasoning in driving aversion to risk and ambiguity

  • Jeffrey V. Butler
  • Luigi Guiso
  • Tullio Jappelli


Using a large sample of retail investors as well as experimental data we find that risk and ambiguity aversion are positively correlated. We provide evidence that a common link is decision mode: intuitive thinkers tolerate more risk and ambiguity than effortful reasoners. One interpretation is that intuitive thinking confers an advantage in risky or ambiguous situations. We present supporting lab and field evidence that intuitive thinkers outperform others in uncertain environments. Finally, we find that risk and ambiguity aversion vary with individual characteristics and wealth. The wealthy are less risk averse but more ambiguity averse, which has implications for financial puzzles.


Ambiguity aversion Risk ambiguity Decision theory  Dual systems Intuitive thinking 

JEL Classification

D81 D83 



We thank the editor and an anonymous referee whose suggestions greatly improved the paper. We are grateful to conference participants at the IDEI-SCOR Conference on Risk Sharing and Finance, the International Meeting on Experimental and Behavioral Economics 2012, the International ESA Conference 2012 and the FUR XV International Conference. We also thank EIEF for generous financial support and for the use of their laboratory facilities.

Supplementary material

11238_2013_9407_MOESM1_ESM.docx (38 kb)
Supplementary material 1 (docx 37 KB)
11238_2013_9407_MOESM2_ESM.docx (283 kb)
Supplementary material 2 (docx 283 KB)


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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  • Jeffrey V. Butler
    • 1
  • Luigi Guiso
    • 1
  • Tullio Jappelli
    • 2
  1. 1.EIEFRomeItaly
  2. 2.University of Naples Federico II and CSEFNaplesItaly

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