Belief-Ordering Identification of Ambiguity Attitudes with Application to Partnership Dissolving Experiments
24 Pages Posted: 18 Jan 2013 Last revised: 15 Mar 2013
Date Written: July 12, 2012
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: Suggested Citation