Zooming in on Ambiguity Attitudes

Baillon, Aurélien; Emirmahmutoglu, Aysil

doi:10.1111/iere.12331

Cited by 9 publications

(2 citation statements)

References 56 publications

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“…If one accepts expected utility as the relevant normative benchmark, our findings answer the questions whether TR should matter for optimal behavior. Recent experimental evidence rejects universal ambiguity aversion (Baillon & Emirmahmutoglu, 2018; Kocher et al, 2018), which helps motivate our risk‐based approach relative to a preference‐based approach.…”

Section: Some Related Literaturementioning

confidence: 95%

Should we do more when we know less? The effect of technology risk on optimal effort

Peter

2021

J of Risk & Insurance

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Technology risk arises when the effectiveness of self‐insurance and self‐protection activities depends on exogenous factors or is only imperfectly known. It affects optimal behavior via a preference channel and a technology channel. In this paper, we identify conditions for unambiguous comparative statics with respect to the presence of, as well as various stochastic changes in technology risk. These conditions involve prudence, relative risk aversion, relative prudence, and several new measures of mitigation efficacy. We highlight cases where technology risk raises the optimal level of effort, consistent with the precautionary principle. We discuss several applications of our results.

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Section: Some Related Literaturementioning

confidence: 95%

Should we do more when we know less? The effect of technology risk on optimal effort

Peter

2021

J of Risk & Insurance

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“…Studies using the Prince system of this paper include Baillon and Emirmahmutoglu (2018), Baucells and Villasís (2015), Bruhin, Santos-Pinto, and Staubli (2018), Calford (2020), Castillo (2020), and Li, Turmunkh, and Wakker (2019.…”

Section: Parts Of Prince Used In Preceding Studiesmentioning

confidence: 99%

Prince: An improved method for measuring incentivized preferences

et al. 2021

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This paper introduces the Prince incentive system for measuring preferences. Prince combines the tractability of direct matching, allowing for the precise and direct elicitation of indifference values, with the clarity and validity of choice lists. It makes incentive compatibility completely transparent to subjects, avoiding the opaqueness of the Becker-DeGroot-Marschak mechanism. It can be used for adaptive experiments while avoiding any possibility of strategic behavior by subjects. To illustrate Prince’s wide applicability, we investigate preference reversals, the discrepancy between willingness to pay and willingness to accept, and the major components of decision making under uncertainty: utilities, subjective beliefs, and ambiguity attitudes. Prince allows for measuring utility under risk and ambiguity in a tractable and incentive-compatible manner even if expected utility is violated. Our empirical findings support modern behavioral views, e.g., confirming the endowment effect and showing that utility is closer to linear than classically thought. In a comparative study, Prince gives better results than a classical implementation of the random incentive system.

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Are physicians rational under ambiguity?

Gao,

Huang,

Liu

et al. 2024

J Risk Uncertain

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Do physicians behave rationally when facing a new disease? This study assesses physicians’ ambiguity attitudes towards the future severity of the COVID-19 pandemic in its early stages and the financial market in the US using an incentive-compatible online experiment. Our findings indicate that physicians demonstrate significant deviations from expected utility, characterized by a modest degree of ambiguity aversion and pronounced levels of likelihood insensitivity. While physicians generally show less insensitivity to uncertainty compared to the general public, both groups exhibited similar levels of irrationality when dealing with the ambiguity surrounding the COVID-19 severity. These results underscore the necessity for debiasing strategies among medical professionals, especially in managing real-world uncertainties, with a specific focus on mitigating likelihood insensitivity.

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Zooming in on Ambiguity Attitudes

Cited by 9 publications

References 56 publications

Should we do more when we know less? The effect of technology risk on optimal effort

Should we do more when we know less? The effect of technology risk on optimal effort

Prince: An improved method for measuring incentivized preferences

Are physicians rational under ambiguity?

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