In this paper, the assumption of monotonicity of Anscombe and Aumann (1963) is replaced by an assumption of monotonicity with respect to first-order stochastic dominance. I derive a representation result where ambiguous distributions of objective beliefs are first aggregated into “equivalent...

We report a portfolio-choice experiment that enables us to estimate parametric models of ambiguity aversion at the level of the individual subject. The assets are Arrow securities that correspond to three states of nature, where one state is risky with known probability and two states are...

As illustrated by the famous Ellsberg paradox, many subjects prefer to bet on events with known rather than with unknown probabilities, i.e., they are ambiguity averse. In an experiment, we examine subjects’ choices when there is an additional source of ambiguity, namely, when they do not know...

We study in an experiment whether humans prefer to depend on decisions of other humans (social uncertainty) or states of nature (environmental uncertainty). In the social uncertainty treatments subjects depend only on past decisions of other humans. This is the first experiment that studies...

Most models of ambiguity aversion satisfy Anscombe-Aumann's Monotonicity axiom. This paper proposes a test of Monotonicity, the Allais Horse Race. It is an adaptation of the Allais paradox to a setting with both subjective and objective uncertainty. Viewed as a thought experiment, the Allais...

This paper experimentally investigates individual information acquisition and decisions in ambiguous situations in which the degree of ambiguity can endogenously and individually be decreased by the subjects. In particular, I analyze how risk aversion, ambiguity attitude and personality traits...

We implement an experiment to elicit subjects’ ambiguity attitudes in the spirit of Ellsberg’s three-color urn. The procedure includes three design elements that (together) have not been featured in similar experiments: Strict ambiguity preferences, a single decision, and a mechanical...

Prior research suggests that those who rely on intuition rather than effortful reasoning when making decisions are less averse to risk and ambiguity. The evidence is largely correlational, however, leaving open the question of the direction of causality. In this paper, we present experimental...

Prospect theory (PT) is the dominant descriptive theory of decision making under risk today. For the modeling of choices, PT relies on a psychologically founded separation of risk attitudes into attitudes towards outcomes, captured in a value function; and attitudes towards probabilities,...