Yang, Chun-Lei and Yao, Lan (2011): Ellsberg Paradox and Second-order Preference Theories on Ambiguity: Some New Experimental Evidence.
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We study the two-color problem by Ellsberg (1961) with the modification that the decision maker draws twice with replacement and a different color wins in each draw. The 50-50 risky urn turns out to have the highest risk conceivable among all prospects including the ambiguous one, while all feasible color distributions are mean-preserving spreads to one another. We show that the well-known second-order sophisticated theories like MEU, CEU, and REU as well as Savage’s first-order theory of SEU share the same predictions in our design, for any first-order risk attitude. Yet, we observe that substantial numbers of subjects violate the theory predictions even in this simple design.
|Item Type:||MPRA Paper|
|Original Title:||Ellsberg Paradox and Second-order Preference Theories on Ambiguity: Some New Experimental Evidence|
|English Title:||Ellsberg Paradox and Second-order Preference Theories on Ambiguity: Some New Experimental Evidence|
|Keywords:||Ellsberg paradox, Ambiguity, Second-order risk, Second-order preference theory, Experiment|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior
|Depositing User:||Lan YAO|
|Date Deposited:||01. Feb 2011 19:32|
|Last Modified:||11. Feb 2013 18:11|
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