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Testing Ambiguity Models through the Measurement of Probabilities for Gains and Losses
This paper reports on two experiments that test the descriptive validity of ambiguity models using a natural source of uncertainty (the evolution of stock indices) and both gains and losses. We observed violations of probabilistic sophistication, violations that imply a fourfold pattern of ambiguity...
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| Published in: | American economic journal. Microeconomics 2015-05, Vol.7 (2), p.77-100 |
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| Main Authors: | , |
| Format: | Article |
| Language: | English |
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| cites | cdi_FETCH-LOGICAL-c453t-2ac3f9372c6c4793a90a896695c9bbe67aa7a50c37004ab8055f0fdacc0bb4a03 |
| container_end_page | 100 |
| container_issue | 2 |
| container_start_page | 77 |
| container_title | American economic journal. Microeconomics |
| container_volume | 7 |
| creator | Baillon, Aurélien Bleichrodt, Han |
| description | This paper reports on two experiments that test the descriptive validity of ambiguity models using a natural source of uncertainty (the evolution of stock indices) and both gains and losses. We observed violations of probabilistic sophistication, violations that imply a fourfold pattern of ambiguity attitudes: ambiguity aversion for likely gains and unlikely losses and ambiguity seeking for unlikely gains and likely losses. Our data are most consistent with prospect theory and, to a lesser extent, α-maxmin expected utility and Choquet expected utility. Models with uniform ambiguity attitudes are inconsistent with most of the observed behavioral patterns. |
| doi_str_mv | 10.1257/mic.20130196 |
| format | article |
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| fulltext | fulltext |
| identifier | ISSN: 1945-7669 |
| ispartof | American economic journal. Microeconomics, 2015-05, Vol.7 (2), p.77-100 |
| issn | 1945-7669 1945-7685 |
| language | eng |
| recordid | cdi_proquest_journals_1676203195 |
| source | EconLit s plnými texty; ABI/INFORM global; JSTOR Archival Journals and Primary Sources Collection; American Economic Association |
| subjects | Ambiguity Attitudes Betting Economic models Economic statistics Economic theory Economic uncertainty Expected utility Experiments Gains Losses Microeconomic modeling Microeconomics Modeling Probability Prospect theory Stock market indices Studies Uncertainty Validity Violations |
| title | Testing Ambiguity Models through the Measurement of Probabilities for Gains and Losses |
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