Preference Reversals for Ambiguity Aversion

This paper finds preference reversals in measurements of ambiguity aversion, even if psychological and informational circumstances are kept constant. The reversals are of a fundamentally different nature than the reversals found before because they cannot be explained by context-dependent weightings...

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Bibliographic Details
Published in:Management science 2011-07, Vol.57 (7), p.1320-1333
Main Authors: Trautmann, Stefan T., Vieider, Ferdinand M., Wakker, Peter P.
Format: Article
Language:English
Subjects:
Ambiguity
Ambiguity aversion
Applied sciences
Attitudes
Betting
Binomials
Choice (Psychology)
choice versus valuation
Decision analysis
Decision theory
Decision theory. Utility theory
Economic uncertainty
Empirical research
Endowments
Exact sciences and technology
Experiments
Gambling
Loss
Loss aversion
Management science
Operational research and scientific management
Operational research. Management science
preference reversal
Preferences
Prospect theory
Psychological aspects
Risk aversion
Risk theory
Studies
Term weighting
Valuation
Willingness to pay
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Summary:This paper finds preference reversals in measurements of ambiguity aversion, even if psychological and informational circumstances are kept constant. The reversals are of a fundamentally different nature than the reversals found before because they cannot be explained by context-dependent weightings of attributes. We offer an explanation based on Sugden's random-reference theory, with different elicitation methods generating different random reference points. Then measurements of ambiguity aversion that use willingness to pay are confounded by loss aversion and hence overestimate ambiguity aversion. This paper was accepted by Teck Ho, decision analysis.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.1110.1343