You are here: Home Seminar Archive 2017/18 Winter Term Applied Micro Workshop – Peter P. Wakker, “Measuring Ambiguity Attitudes for All (Natural) Events”

Applied Micro Workshop – Peter P. Wakker, “Measuring Ambiguity Attitudes for All (Natural) Events”

— filed under:

Aurélien Baillon, Zhenxing Huang, Asli Selim, and Peter P. Wakker: “Measuring Ambiguity Attitudes for All (Natural) Events” Uncertainties usually don’t come with objective statistical probabilities, and subjective probabilities usually don’t work either (Ellsberg 1961). Gilboa & Schmeidler’s break-through brought fundamentally new models, opening up the field of ambiguity, sorely needed in many disciplines in economics. Ambiguity attitudes have so far been measured almost exclusively for artificial events (Ellsberg urns and experimenter-specified probability intervals) because researchers did not know how to control for unknown beliefs otherwise. Ellsberg (2011) and many others emphasized the importance of extending to natural events. By showing how to control for beliefs even if unknown, we provide this extension. Ambiguity attitudes can now be measured for natural events, greatly enhancing external validity. We introduce indexes of ambiguity aversion and ambiguity perception (or sensitivity) for natural events that are easy to use in experiments, taking only a few minutes. Thus, they can easily be used as an add-on in regressions. We prove that our indexes generalize and unify many indexes proposed before in the literature under various theories, including multiple priors, Choquet expected utility, prospect theory, and biseparable utility. Our indexes generalize their predecessors by: (a) being directly observable; (b) not requiring expected utility for risk; (c) being valid for a large number of ambiguity theories; (d) requiring no assessment of subjective likelihoods and, hence, which is our main novelty, (e) being applicable to natural ambiguities. Because time pressure is important in many economic decisions, and has recently been introduced in experimental economics to control cognitive factors—following decades of use in psychology—we apply our indexes to examining the role of ambiguity attitudes on behavior under time pressure. In an experiment, we find plausible results, supporting validity. For natural events, the cognitive perception/sensitivity of ambiguity is more important, and the motivational aversion is less pronounced, than for artificial Ellsberg events.

Event details
  • Presentation
When Jan 16, 2018
from 16:00 to 17:30
Where briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9
Add event to calendar vCal

More information about this event…

Document Actions