Related papers: Randomization and ambiguity perception
We design and implement lab experiments to evaluate the normative appeal of behavior arising from models of ambiguity-averse preferences. We report two main empirical findings. First, we demonstrate that behavior reflects an incomplete…
We represent preferences that exhibit absolute or relative attitudes towards ambiguity without assuming convexity of preferences. Our analysis is motivated by the recent experimental evidence by Baillon and Placido (2019) indicating that…
This paper studies sequential information acquisition by an ambiguity-averse decision maker (DM), who decides how long to collect information before taking an irreversible action. The agent optimizes against the worst-case belief and…
We conduct an incentivized experiment on a nationally representative US sample \\ (N=708) to test whether people prefer to avoid ambiguity even when it means choosing dominated options. In contrast to the literature, we find that 55\% of…
Preferences for mixing can reveal ambiguity perception and attitude on a single event. The validity of the approach is discussed for multiple preference classes including maxmin, maxmax, variational, and smooth second-order preferences. An…
Decision makers sometimes cannot observe the consequences of their actions ex-post. This paper axiomatically characterizes a decision model in which the decision maker cares about verifying that a good consequence has been achieved.…
Completeness and transitivity are standard rationality conditions in economics. However, under ambiguity, decision makers sometimes violate these requirements because of the difficulty of forming accurate predictions about ambiguous events.…
We consider statistical Markov Decision Processes where the decision maker is risk averse against model ambiguity. The latter is given by an unknown parameter which influences the transition law and the cost functions. Risk aversion is…
Randomness in scientific estimation is generally assumed to arise from unmeasured or uncontrolled factors. However, when combining subjective probability estimates, heterogeneity stemming from people's cognitive or information diversity is…
How do entrepreneurs act on their beliefs when probabilities of outcomes are unknown but subjectively perceived? We theorize that two distinct dimensions of ambiguity attitudes influence entrepreneurial action: ambiguity aversion - the…
This paper studies a new and more general axiomatization than one presented previously for preference on likelihood gambles. Likelihood gambles describe actions in a situation where a decision maker knows multiple probabilistic models and a…
The Availability bias, manifested in the over-representation of extreme eventualities in decision-making, is a well-known cognitive bias, and is generally taken as evidence of human irrationality. In this work, we present the first…
This article introduces a framework for evaluating statistical decisions under both prior ambiguity and likelihood misspecification. We begin with an ambiguity set - a frequentist model that pairs a possibly misspecified likelihood with…
Decisions in organizations are about evaluating alternatives and choosing the one that would best serve organizational goals. To the extent that the evaluation of alternatives could be formulated as a predictive task with appropriate…
We study the revenue comparison problem of auctions when the seller has a maxmin expected utility preference. The seller holds a set of priors around some reference belief, interpreted as an approximating model of the true probability law…
Complexity of the problem of choosing among uncertain acts is a salient feature of many of the environments in which departures from expected utility theory are observed. I propose and axiomatize a model of choice under uncertainty in which…
Randomness in scientific estimation is generally assumed to arise from unmeasured or uncontrolled factors. However, when combining subjective probability estimates, heterogeneity stemming from people's cognitive or information diversity is…
In this work we generalize standard Decision Theory by assuming that two outcomes can also be incomparable. Two motivating scenarios show how incomparability may be helpful to represent those situations where, due to lack of information,…
Ambiguity and ambiguity aversion have been widely studied in decision theory and economics both at a theoretical and an experimental level. After Ellsberg's seminal studies challenging subjective expected utility theory (SEUT), several…
Humans display a tendency to pay more attention to bad outcomes, often in a disproportionate way relative to their statistical occurrence. They also display euphorism, as well as a preference for the current state of affairs (status quo…