Working Paper: NBER ID: w20982
Authors: Uri Gneezy; Alex Imas; John List
Abstract: We introduce a simple, easy to implement instrument for jointly eliciting risk and ambiguity attitudes. Using this instrument, we structurally estimate a two-parameter model of preferences. Our findings indicate that ambiguity aversion is significantly overstated when risk neutrality is assumed. This highlights the interplay between risk and ambiguity attitudes as well as the importance of joint estimation. In addition, over our stakes levels we find no difference in the estimated parameters when incentives are real or hypothetical, raising the possibility that a simple hypothetical question can provide insights into an individuals preferences over ambiguity in such economic environments.
Keywords: ambiguity aversion; risk attitudes; decision-making; uncertainty
JEL Codes: C9; C91; C92; C93; D81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| risk neutrality (D81) | ambiguity aversion (D81) |
| joint estimation of risk and ambiguity attitudes (D81) | ambiguity aversion (D81) |
| risk neutrality assumption (D81) | estimated parameters of ambiguity aversion (D81) |
| real versus hypothetical stakes (D80) | estimated parameters of ambiguity aversion (D81) |