Attanasi, Giuseppe Marco, Gollier, Christian, Montesano, Aldo and Pace, Noémie (2012) Eliciting ambiguity aversion in unknown and in compound lotteries: A KMM experimental approach. TSE Working Paper, n. 12-338, Toulouse

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Abstract

We define coherent-ambiguity aversion within the Klibanoff, Marinacci and Mukerji (2005)
smooth ambiguity model (henceforth KMM) as the combination of choice-ambiguity aversion and
value-ambiguity aversion. We analyze theoretically ?ve ambiguous decision tasks, where a subject
faces two-stage lotteries with binomial, uniform or unknown second-order probabilities. We check
our theoretical predictions through a 10-task laboratory experiment. In (unambiguous) tasks 1-5,
we elicit risk aversion both through a portfolio choice method and through a BDM mechanism. In
(ambiguous) tasks 6-10, we elicit choice-ambiguity aversion through the portfolio choice method
and value-ambiguity aversion through the BDM mechanism. We ?nd that more than 75% of
classi?ed subjects behave according to the KMM model in all tasks 6-10, independent of their
degree of risk aversion. Further, the percentage of coherently-ambiguity-averse subjects is lower
in the binomial than in the uniform and in the unknown treatment, with only the latter difference
being signi?cant. Finally, highly-risk-averse subjects are more prone to coherent-ambiguity.

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• Eliciting ambiguity aversion in unknown and in compound lotteries: A KMM experimental approach. (deposited 09 Jul 2014 17:29) [Currently Displayed]
  • Eliciting ambiguity aversion in unknown and in compound lotteries: A smooth ambiguity model experimental study. (deposited 16 Mar 2015 14:39)