Working Papers
Working Papers
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Abstract: A popular framework for ambiguity represents alternatives of choice as two-stage gambles reflecting the uncertainty about the true probability on the state space. In this framework, ambiguity-averse behaviour could be driven by differences in utilities between stages—as in the smooth ambiguity model (Klibanoff et al., 2005)—or by non-linear probability weighting—as in a line of research initiated by Segal (1987). The present paper investigates the relevance of these distinct drivers of ambiguity attitudes in a two-stage setup by estimating a generalization of the smooth ambiguity model incorporating probability weighting. Our experiment reveals the relevance of both factors to describing ambiguity attitudes. We also report evidence of stakes-dependence of ambiguity attitudes, as implied by utility-driven approaches.
Abstract: A popular framework for ambiguity represents alternatives of choice as two-stage gambles reflecting the uncertainty about the true probability on the state space. In this framework, ambiguity-averse behaviour could be driven by differences in utilities between stages—as in the smooth ambiguity model (Klibanoff et al., 2005)—or by non-linear probability weighting—as in a line of research initiated by Segal (1987). The present paper investigates the relevance of these distinct drivers of ambiguity attitudes in a two-stage setup by estimating a generalization of the smooth ambiguity model incorporating probability weighting. Our experiment reveals the relevance of both factors to describing ambiguity attitudes. We also report evidence of stakes-dependence of ambiguity attitudes, as implied by utility-driven approaches.
Abstract: Is there a fundamental gain-loss asymmetry in information preferences? Using two-stage lotteries with varying dates of resolution and a fixed future date of payment, we ask subjects when they want to know the outcome: earlier, gradually, or later. When facing gains, information seeking predominates, becoming stronger at higher likelihoods. However, in the domain of losses, we find indifference between gradual and late resolution. Moreover, higher the probability of losing, weaker is the demand for information. Remarkably, a sizeable minority are willing to pay for ignorance of bad news, a novel and explicit demonstration of information avoidance that is referred to as the ostrich effect. Our findings are inconsistent with established models in economics that cannot accommodate domain dependence of information preferences. They also reveal the importance of emotions in driving attitudes towards information.
Abstract: Is there a fundamental gain-loss asymmetry in information preferences? Using two-stage lotteries with varying dates of resolution and a fixed future date of payment, we ask subjects when they want to know the outcome: earlier, gradually, or later. When facing gains, information seeking predominates, becoming stronger at higher likelihoods. However, in the domain of losses, we find indifference between gradual and late resolution. Moreover, higher the probability of losing, weaker is the demand for information. Remarkably, a sizeable minority are willing to pay for ignorance of bad news, a novel and explicit demonstration of information avoidance that is referred to as the ostrich effect. Our findings are inconsistent with established models in economics that cannot accommodate domain dependence of information preferences. They also reveal the importance of emotions in driving attitudes towards information.
Work in Progress
Work in Progress
Ambiguous Forever? Preferences for Ex-ante and Ex-post Probability Information
Ambiguous Forever? Preferences for Ex-ante and Ex-post Probability Information
Abstract: After a decision under ambiguity or compound risk, the probabilities associated with the resolution of the final outcome may remain unknown forever or be revealed either before (ex-ante) or after (ex-post) the resolution. Using an integrated discrete-choice experiment, this paper investigates preferences for ex-ante and ex-post information about probabilities under ambiguity and compound risk, in addition to attitudes toward uncertainty in both domains. Our results reveal model-free behavioral patterns and also support an econometric implementation of source theory, capturing preferences along two key dimensions: elevation and likelihood sensitivity. We find demand for both ex-ante and ex-post information that is likelihood-independent and highly correlated both within and across domains, suggesting the presence of a stable behavioral trait. Moreover, the information premium is positively correlated with ambiguity attitudes, but not with compound risk attitudes. These findings offer new insights into the relationship between ambiguity aversion, compound risk aversion, and the demand for information.
Abstract: After a decision under ambiguity or compound risk, the probabilities associated with the resolution of the final outcome may remain unknown forever or be revealed either before (ex-ante) or after (ex-post) the resolution. Using an integrated discrete-choice experiment, this paper investigates preferences for ex-ante and ex-post information about probabilities under ambiguity and compound risk, in addition to attitudes toward uncertainty in both domains. Our results reveal model-free behavioral patterns and also support an econometric implementation of source theory, capturing preferences along two key dimensions: elevation and likelihood sensitivity. We find demand for both ex-ante and ex-post information that is likelihood-independent and highly correlated both within and across domains, suggesting the presence of a stable behavioral trait. Moreover, the information premium is positively correlated with ambiguity attitudes, but not with compound risk attitudes. These findings offer new insights into the relationship between ambiguity aversion, compound risk aversion, and the demand for information.
Decision Prediction from Limited Data: Classical vs Bayesian Approaches
Decision Prediction from Limited Data: Classical vs Bayesian Approaches
Behavioral Drivers of Social Entrepreneurship
Behavioral Drivers of Social Entrepreneurship
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