Signaling probabilities in ambiguity: who reacts to vague news?

Abstract

Ambiguity affects decisions of people who exhibit a distaste of and require a premium for dealing with it. Do ambiguity-neutral subjects completely disregard ambiguity and react to any vague news? Online vending platforms often attempt to affect buyer's decisions by messages like ''20 people are looking at this item right now'' or ''The average score based on 567 reviews is 7.9/10''. We augment the two-color Ellsberg experiment with similarly worded signals about the unknown probability of success. All decision-makers, including ambiguity-neutral, recognize and account for ambiguity; ambiguity-neutral subjects are less likely to respond to vague signals. The difference between decisions of ambiguity-neutral and non-neutral subjects vanishes for high precision signals; still less than 60% subjects choose the ambiguous urn, even for high communicated probabilities of success. We conjecture participants may discard information, if they see no contradiction between it and their prior beliefs, hence the latter are not updated. Higher confidence makes subjects more likely to discard the news, and empirically ambiguity-neutral subjects appear more confident than those ambiguityaverse.

Ambiguity Attitudes and Surprises: Experimental Evidence on Communicating New Information within a Large Population Sample

“…Baillon et al (2018a) find that little effects of information on ambiguity aversion, but some effects of ambiguity perception. Vinogradov and Makhlouf (2021) find that ambiguity-neutral subjects react differently to (vague) news than ambiguity averse subjects. They conjecture that subjects consider if the new information requires the priors to be updated or not.…”

“…In Vinogradov and Makhlouf (2021)'s related study, participants decide between an ambiguous urn and a balanced risky urn. In a second stage, the same question has to be answered again but different type of vague news are introduced.…”