Uncertainty aversion and preference for randomization

Schnedler, Wendelin ; Dominiak, Adam

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URL: http://ub-madoc.bib.uni-mannheim.de/2342
URN: urn:nbn:de:bsz:180-madoc-23422
Document Type: Working paper
Year of publication: 2008
The title of a journal, publication series: None
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: D8 C9 ,
Subject headings (SWD): Randomisierung , Choquet-Kapazität
Keywords (English): uncertainty aversion , ambiguity , subjective expected utility , preference for randomization , Choquet expected utility , minmax utility
Abstract: Individuals exhibit preferences for randomization if they prefer random mixtures of two bets to each of the involved bets. Such preferences underpin various models of uncertainty aversion. However, it has to our knowledge not been empirically investigated whether uncertainty-averse decision makers indeed exhibit such preferences. Here, we examine the relationship experimentally. We find that uncertainty aversion is not positively associated with preferences for randomization. Moreover, we observe a puzzling behavior that is not predicted: a non-negligible number of uncertain-averse subjects seem to dislike randomization.
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