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...

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...

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...

The results of an experiment extending Ellsberg's setup demonstrate that attitudes towards ambiguity and compound uncertainty are closely related. However, this association is much stronger when the second layer of uncertainty is subjective than when it is objective. Provided that the compound...

Experiments on intertemporal consumption typically show that people have difficulties in optimally solving such problems. Previous studies have focused on contexts in which agents are faced with risky future incomes and have to plan over long horizons. We present an experiment comparing decision...

When confronted with uncertain prospects, people often exhibit both choice deferral and Ellsberg-type ambiguity aversion. This paper obtains a joint representation for these behavioral phenomena. The decision maker as portrayed by my model is willing to choose an uncertain prospect f over g...

The standard Bayesian model implies that information can never have a negative value. We put this implication to the proof. Our paper provides the first test of the value (positive or negative) of information under uncertainty. We show that the "Bayesian implication" stands in conflict with the...

We review some of the (theoretical) economic implications of David Schmeidler's models of decision under uncertainty (Choquet expected utility and maxmin expected utility) in competitive market settings. We start with the portfolio inertia result of Dow and Werlang (1992), show how it does or...

The pricing of an ambiguous asset, whose cash flow stream is uncertain, may be affected by three factors: the belief regarding the realization likelihood of cash flows, the subjective attitude towards risk, and the attitude towards ambiguity. While previous literature looks at the total price...