Belief-Ordering Identification of Ambiguity Attitudes with Application to Partnership Dissolving Experiments

24 Pages Posted: 18 Jan 2013 Last revised: 15 Mar 2013

See all articles by Ning Neil Yu

Ning Neil Yu

Nanjing Audit University - Institute for Social and Economic Research

Thorsten Chmura

University of Bonn - Faculty of Law & Economics; Nottingham University Business School

Date Written: July 12, 2012

Abstract

To identify ambiguity attitudes in general environments, we propose a noncontroversial and easy-to-apply method that first orders beliefs by their "favorableness," and then make inferences based on choices. In our first-price two-person partnership dissolving auction experiments, the partners with large shares bid less aggressively in an ambiguity environment than in a uniform distribution environment; the opposite holds for small-share partners. We identify consistent ambiguity aversion in this case. In another treatment of subjects bidding against random numbers, the large-share partners bid higher interacting with ambiguous bids than with uniformly-distributed ones -- a result of ambiguity seeking. Instability of ambiguity attitudes exemplifies the importance message conveyed by the ambiguity literature that it is unscientific to apply the theory of subjective expected utility without taking into account the changing contexts.

Keywords: Ambiguity Aversion/Seeking, Partnership Dissolving Auction, Ellsberg Urns Experiments

JEL Classification: C91, D44, D81, D83

Suggested Citation

Yu, Ning Neil and Chmura, Thorsten, Belief-Ordering Identification of Ambiguity Attitudes with Application to Partnership Dissolving Experiments (July 12, 2012). Available at SSRN: https://ssrn.com/abstract=2202361 or http://dx.doi.org/10.2139/ssrn.2202361

Ning Neil Yu (Contact Author)

Nanjing Audit University - Institute for Social and Economic Research ( email )

Stanford, CA 94305
United States

Thorsten Chmura

University of Bonn - Faculty of Law & Economics ( email )

Postfach 2220
D-53012 Bonn
Germany

Nottingham University Business School

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

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