Randomize at Your Own Risk: On the Observability of Ambiguity Aversion

S-Tier
Journal: Econometrica
Year: 2022
Volume: 90
Issue: 3
Pages: 1085-1107

Score contribution per author:

2.681 = (α=2.01 / 3 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Facing several decisions, people may consider each one in isolation or integrate them into a single optimization problem. Isolation and integration may yield different choices, for instance, if uncertainty is involved, and only one randomly selected decision is implemented. We investigate whether the random incentive system in experiments that measure ambiguity aversion provides a hedge against ambiguity, making ambiguity‐averse subjects who integrate behave as if they were ambiguity neutral. Our results suggest that about half of the ambiguity averse subjects integrated their choices in the experiment into a single problem, whereas the other half isolated. Our design further enables us to disentangle properties of the integrating subjects' preferences over compound objects induced by the random incentive system and the choice problems in the experiment.

Technical Details

RePEc Handle
repec:wly:emetrp:v:90:y:2022:i:3:p:1085-1107
Journal Field
General
Author Count
3
Added to Database
2026-01-24