Theory and Decision 66 (3):199-228 (2008)

Abstract
We use the multiple price list method and a recursive expected utility theory of smooth ambiguity to separate out attitude towards risk from that towards ambiguity. Based on this separation, we investigate if there are differences in agent behaviour under uncertainty over gain amounts vis-a-vis uncertainty over loss amounts. On an aggregate level, we find that (i) subjects are risk averse over gains and risk seeking over losses, displaying a “reflection effect” and (ii) they are ambiguity neutral over gains and are mildly ambiguity seeking over losses. Further analysis shows that on an individual level, and with respect to both risky and ambiguous prospects, there is limited incidence of a reflection effect where subjects are risk/ambiguity averse (seeking) in gains and seeking (averse) in losses, though this incidence is higher for ambiguous prospects. A very high proportion of such cases of reflection exhibit risk (ambiguity) aversion in gains and risk (ambiguity) seeking in losses, with the reverse effect being significantly present in the case of risk but almost absent in case of ambiguity. Our results suggest that reflection across gains and losses is not a stable individual characteristic, but depends upon whether the form of uncertainty is precise or ambiguous, since we rarely find an individual who exhibits reflection in both risky and ambiguous prospects. We also find that correlations between attitudes towards risk and ambiguity were domain dependent
Keywords Recursive expected utility  Risk  Ambiguity
Categories (categorize this paper)
Reprint years 2009
ISBN(s)
DOI 10.1007/s11238-008-9112-4
Options
Edit this record
Mark as duplicate
Export citation
Find it on Scholar
Request removal from index
Revision history

Download options

PhilArchive copy


Upload a copy of this paper     Check publisher's policy     Papers currently archived: 53,514
External links

Setup an account with your affiliations in order to access resources via your University's proxy server
Configure custom proxy (use this if your affiliation does not provide a proxy)
Through your library

References found in this work BETA

Add more references

Citations of this work BETA

View all 8 citations / Add more citations

Similar books and articles

Jaffray’s Ideas on Ambiguity.Peter P. Wakker - 2011 - Theory and Decision 71 (1):11-22.
On Risk and Rationality.Brad Armendt - 2014 - Erkenntnis 79 (S6):1-9.

Analytics

Added to PP index
2013-12-01

Total views
59 ( #161,270 of 2,348,290 )

Recent downloads (6 months)
1 ( #510,851 of 2,348,290 )

How can I increase my downloads?

Downloads

My notes