Abstract
The objective of this study is to design a laboratory experiment to explore the effect of ambiguity on a subject’s search behavior in a finite-horizon sequential search model. In so doing, we employ a strategy to observe the potential trend of reservation points that is usually unobserved. We observe that subjects behaving consistently across treatments reduce their reservation points in the face of ambiguity over point distribution. Our result is consistent with the theoretical implication obtained by Nishimura and Ozaki (J Econ Theory 119:299–333, 2004).
Similar content being viewed by others
Notes
In this paper, the two terms Knightian uncertainty and ambiguity are used interchangeably. For a survey, see Etner et al. (2012).
Cox and Oaxaca (2000) conduct laboratory experiments of job search under unknown distributions, but they only investigate the impact on search durations. In the context of ambiguity other than in job search models, see Attansi et al. (2014), Brunette et al. (2014), Chen et al. (2007), Cohn et al. (2011), Della Seta et al. (2014), Eichberger et al. (2008), Hayashi and Wada (2010), and Viefers (2012).
In our experiment, we use “point” to prevent subjects from associating “wage” with their actual job search activity.
We use the exchange rate of JPY 118.53 to USD 1 for January 10, 2015.
References
Attansi, G., Gollier, C., Montesano, A., & Pace, N. (2014). Eliciting ambiguity aversion in unknown and in compound lotteries: A smooth ambiguity model experimental study. Theory and Decision, 77, 485–530.
Boone, J., Sadrieh, A., & van Ours, J. C. (2009). Experiments on unemployment benefit sanctions and job search behavior. European Economic Review, 53, 937–951.
Brown, M., Flinn, C. J., & Schotter, A. (2011). Real-time search in the laboratory and the market. American Economic Review, 101(2), 498–974.
Brunette, M., Cabantous, L., Couture, S. (2014). Are individuals more risk and ambiguity averse in a group environment or alone? Results from an experimental study. Theory and Decision, 1–20.
Chen, Y., Katuščák, P., & Ozdenoren, E. (2007). Sealed bid auction with ambiguity: Theory and experiments. Journal of Economic Theory, 136, 513–535.
Cohn, M., Tallon, J.-M., & Vergnaud, J.-C. (2011). An experimental investigation of imprecision attitude and its relation with risk attitude and impatience. Theory and Decision, 71, 81–109.
Cox, J. C., & Oaxaca, R. L. (1989). Laboratory experiments with a finite-horizon job-search model. Journal of Risk and Uncertainty, 2, 301–330.
Cox, J. C., & Oaxaca, R. L. (1992). Direct tests of the reservation wage property. Economic Journal, 102, 1423–1432.
Cox, J. C., & Oaxaca, R. L. (2000). Good news and bad news: Search from unknown wage offer distributions. Experimental Economics, 2(3), 197–225.
Della Seta, M., Gryglewicz, S., & Kort, P. (2014). Willingness to wait under risk and ambiguity. Berkeley: Mimeo.
Eichberger, J., Kelsey, D., & Schipper, B. (2008). Granny versus game theorist: Ambiguity in experimental games. Theory and Decision, 64, 333–362.
Etner, J., Jeleva, M., & Tallon, J.-M. (2012). Decision theory under ambiguity. Journal of Economic Surveys, 26, 234–270.
Fischbacher, U. (2007). Z-tree Zurich toolbox for ready-made economic experiments. Experimental Economics, 10, 171–178.
Gilboa, I., & Schmeidler, D. (1989). Maxmin expected utility with non-unique priors. Journal of Mathematical Economics, 18, 141–153.
Harrison, G. W., & Morgan, P. (1990). Search intensity in experiments. Economic Journal, 100, 478–486.
Hayashi, T., & Wada, R. (2010). Choice with imprecise information: An experimental approach. Theory and Decision, 69, 355–373.
Knight, F. (1921). Risk, uncertainty and profit. Boston, MA: Houghton Mifflin.
Nishimura, K. G., & Ozaki, H. (2004). Search and Knightian uncertainty. Journal of Economic Theory, 119, 299–333.
Rothschild, M., & Stiglitz, J. (1971). Increasing risk II: Its economic consequences. Journal of Economic Theory, 3, 66–84.
Schunk, D. (2009). Behavioral heterogeneity in dynamic search situations: Theory and experimental evidence. Journal of Economic Dynamics & Control, 33, 1719–1738.
Schunk, D., & Winter, J. (2009). The relationship between risk attitudes and heuristics in search tasks: A laboratory experiment. Journal of Economic Behavior & Organization, 71, 347–360.
Viefers, P. (2012). Should I stay or should I go? A laboratory investigation of investment opportunities under ambiguity. DIW discussion paper 1228.
Acknowledgments
The authors are grateful to Associate Editor for his/her detailed comments and suggestions that have improved this paper substantially. The authors also thank Takanori Adachi, Keiko Aoki, Yasuyo Hamaguchi, Youichiro Higashi, Yoichi Hizen, Chiang Hui-Yu, and Keisuke Kawata and the participants in the JEA Meeting, the EPA Meeting, and Xiamen University conference. Financial support from the Zengin Foundation for Studies on Economics and Finance, MEXT (No. 23000001, 23530275, and 26380240), GCOE and the ISER grant (Osaka University) the Joint Research Program of KIER are gratefully acknowledged. Okudaira acknowledges a grant from JSPS Postdoctoral Fellowship for Research Abroad. All errors are our responsibility.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Asano, T., Okudaira, H. & Sasaki, M. An experimental test of a search model under ambiguity. Theory Decis 79, 627–637 (2015). https://doi.org/10.1007/s11238-015-9488-x
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11238-015-9488-x