Ambiguity attitudes and social interactions: An experimental investigation

This paper reports the results of experiments testing prevalence of non-neutral ambiguity attitudes and how these attitudes change as a result of interpersonal interactions. To address the first question we conducted experiments involving individual choice between betting on ambiguous and unambiguous events of the subject’s choice. We found that a large majority of subjects display ambiguity neutral attitudes, many others display ambiguity incoherent attitudes, and few subjects display either ambiguity-averse attitudes or ambiguity-seeking attitudes. To address the second question we designed a new experiment with a built-in incentive to persuade. We found that interpersonal interactions without incentives to persuade have no effect on behavior. However, when incentives were introduced, the ambiguity neutral subjects were better able to persuade ambiguity seeking and ambiguity incoherent subjects to adopt ambiguity neutral choice behavior and, to a lesser extent, also ambiguity averse subjects.     

Ambiguity,pessimism, and rational religious choice

Using a subclass of the α-maximin expected-utility preference model, in which the decision maker’s degree of ambiguity and degree of pessimism are each parameterized, we present a theory of religious choice in the Pascalian decision theory tradition, one that can resolve dilemmas, address the “many Gods objection,” and address the ambiguity inherent in religious choice. Parameterizing both the degree of ambiguity and the degree of pessimism allows one to examine how the two interact to impact choice, which is useful regardless of the application. Applying this model to religious choice is a move beyond subjective expected-utility theory, allowing us to show that a change in either the degree of ambiguity or the degree of pessimism can lead a decision maker to “convert” from one religion to another.     

Sleepiness,choice consistency,and risk preferences

We investigate the consistency and stability of individual risk preferences by manipulating cognitive resources. Participants are randomly assigned to an experiment session at a preferred time of day relative to their diurnal preference (circadian matched) or at a non-preferred time (circadian mismatched) and choose allocations between two risky assets [using the Choi et al. (Am Econ Rev 27(5):1921–1938, 2007), design]. We find that choices of circadian matched and mismatched subject are statistically similar in terms of satisfying basic requirements for preference consistency. However, mismatched subjects tend to choose riskier asset bundles.     

Ambiguity and price competition

Theory and Decision - There are few models of price competition in a homogeneous-good market which permit general asymmetries of information amongst the sellers. This work studies a price game with...     

Ambiguity framed

In his exposition of subjective expected utility theory, Savage (1954) proposed that the Allais paradox could be reduced if it were recast into a format which made the appeal of the independence axiom of expected utility theory more transparent. Recent studies consistently find support for this prediction. We consider a salience-based choice model which explains this frame-dependence of the Allais paradox. We then derive the novel prediction that the presentation format responsible for reductions in Allais-style violations of expected utility theory will also reduce Ellsberg-style violations of subjective expected utility theory. This format makes the appeal of Savage’s “sure thing principle” more transparent. We design an experiment to test this prediction and find strong support for such frame-dependence of ambiguity aversion in Ellsberg-style choices. In particular, we observe markedly less ambiguity-averse behavior in Savage’s matrix format than in a more standard “prospect” format. This finding poses a new challenge for the leading models of ambiguity aversion.     

Institutional rules for framing healthcare policy issues in national,financial, and specialized newspapers

By considering the role of institutional rules for news making, this study examines news frames embedded in 1162 stories from national, financial, and specialized newspapers with respect to four healthcare policy issues: “the decrease in pharmaceutical prices,” “the comprehensive medical payment system,” “swine flu,” and “humidifier-related lung disease.” Conflict, economy, crisis, and policy execution are dominant frames in stories about the policy issues, and these four frames are also major frames used by the newspapers. This phenomenon is understood as “concentration of healthcare frames.” We conducted in-depth interviews with 19 news reporters to identify institutional rules that might influence the formation of news frames. In-depth interviews revealed that similar types of frames resulted from institutional rules (e.g., journalist’s autonomy, news value, newspaper’s mission statement, and characteristics of readers). The findings suggest that health journalists follow institutional rules that govern the creation of news frames. To provide diverse perspectives on healthcare policy issues, newspapers need to reconsider their institutional rules.     

Measuring and framing support for universal basic income

We execute an original survey experiment to examine the extent and determinants of support for a nascent policy issue, universal basic income (UBI), in the American public. We explore the effects of how UBI is framed (either in the context of values or the context of policy), finding three key results. First, UBI is primarily a Democratic and liberal policy. Second, negative arguments against UBI move support for UBI more than positive arguments. Third, and surprisingly, respondents are equally affected by both policy-driven and value-driven arguments about UBI. In conclusion, an increase in messaging about UBI is likely to widen existing partisan differences in UBI support. These differences are unlikely to be won over by policy or values arguments.     

Ambiguity and risk taking in organizations

Kunreuther, Meszaros, and Hogarth (1993) argue that insurers are risk averse and ambiguity averse, and that they use cognitive reference points and constraints in making pricing decisions. They further claim that insurer ambiguity may be a factor that has a role in market failure at the industry level. Arguably, ambiguity may be an important aspect of decision behavior. In this article, research on managerial risk taking is reviewed with a focus on the relationship between ambiguity and risk taking. In particular, the effects of the organizational and institutional context are highlighted. It is argued that the political aspects of insurer decision behavior should be considered as well. Implications for further study and understanding of decision making are discussed.     

Ambiguity and the value of information

The value of information is studied in a non-expected utility model of ambiguity with second-order probabilities. Information that reduces ambiguity has a positive value for ambiguity-averse decision makers, and the value of information that resolves ambiguity increases with greater ambiguity and with greater ambiguity aversion. Since information that resolves risk is valuable, and must also resolve ambiguity, the value of such information for ambiguity averters increases with greater ambiguity and with greater ambiguity aversion.     

A note on negativity bias and framing response asymmetry

An “unprocessed risk” is a collection of simple lotteries with a reduction-rule that describes the actual-payoff to the decision-maker as a function of realized lottery outcomes. Experiments reveal that the willingness to pay for unprocessed risks is consistently biased toward the payoff-level in the unprocessed representation. The “anchoring-to-frame” bias in cases of positive framing is significantly weaker than in cases of negative framing suggesting that rational “negativity bias” may reflect in asymmetric violations of rationality.     

The framing of nothing and the psychology of choice

Journal of Risk and Uncertainty - Zero outcomes are inconsequential in most models of choice. However, when disclosing zero outcomes they must be designated. It has been shown that a gamble is...     

Religiosity,citizenship and attitudes to social policy issues

Many social policy objectives align with religious beliefs – poverty alleviation, compassion for the poor and addressing more generally the needs of the vulnerable and disadvantaged in society. Yet there are also conflicting views about means, including the role of the state in redistributing resources from the rich and powerful to the poor and powerless. Redistribution and poverty alleviation are central goals of the welfare state, although ideological and other differences mean that views about the need for, as well as the design, delivery and impact of social programs vary. Against this background, this paper reviews existing national and international studies that have examined how religious belief and practice are associated with the attitudes that underpin the welfare state: compassion, altruism, redistribution and egalitarianism, and the activities that are assumed to align with modern conceptions of ‘a good civic citizen‘: participation and engagement. The analysis draws on recent Australian survey data to examine whether the attitudes of those who actively practice their religious beliefs differ from other groups in society and, if so, whether those differences are consistent with the underlying goals of social policy.     

Process fairness,outcome fairness,and dynamic consistency: Experimental evidence for risk and ambiguity

Literature on fairness preferences distinguishes between outcome fairness, concerning the final allocation of payoffs, and process fairness, concerning the expected allocation of payoffs. It is not obvious, however, whether process fairness can consistently be implemented. Once uncertainty is resolved and outcomes are determined, the ex-ante procedurally fair decision maker may become consequentialist ex-post, and reconsider her choice on the basis of the observed outcomes. We present experimental evidence on dynamic consistency of social preferences under both known risk and ambiguity. A significant share of people subscribe to process fairness both before and after the resolution of uncertainty.     

Risk, Advanced Liberalism and Child Welfare: The Need to Rediscover Uncertainty and Ambiguity

Correspondence to Professor Nigel Parton, School of Human and Health Sciences, University of Huddersfield, Queensgate, Huddersfield HD1 3DH. Summary The purpose of this paper is to analyse and reflect upon thecurrent state of child welfare policy and practice and how thishas changed over recent times. In the process it aims to makea contribution to the current debates on ‘the refocusingof children's services’. A central part of the argumentis that new strategies have emerged which do not have as theircentral focus either meeting the needs of children or respondingto child abuse, but the assessment and management of risk. Inselecting such a focus, such developments are in danger of overlookinga central characteristic of policy and practice in terms ofthe pervasiveness of uncertainty and ambiguity. Not only dothese characteristics need to be reorganized, but they needto be built on in order to take our thinking and practices forward.     

Ambiguity aversion under maximum-likelihood updating

Maximum-likelihood updating (MLU) is a well-known approach for extending static ambiguity sensitive preferences to dynamic set-ups. This paper develops an example in which MLU induces an ambiguity averse maxmin expected utility (MEU) decision-maker to (1) prefer a bet on an ambiguous over a risky urn and (2) be more willing to bet on the ambiguous urn compared to an (ambiguity neutral) subjective expected utility (SEU) decision-maker. This is challenging, since prior to observing (symmetric) draws from the urns, the MEU decision-maker (in line with the usual notion of ambiguity aversion) actually preferred the risky over the ambiguous bet and was less willing to bet on the ambiguous urn than the SEU decision-maker. The identified switch in betting preferences is not due to a violation of dynamic consistency or consequentialism. Rather, it results from MLU’s selection of extreme priors, causing a violation of the stability of set inclusion over the course of the updating process.     

Ambiguity and decision modeling: A preference-based approach

In this article, we develop a model that permits a decision maker's preferences to depend on the decision maker's ambiguity about the probability of an event that is relevant for decision-making purposes. We deal with ambiguity through preference modeling, with ambiguity leading to modifications in the utilities of outcomes. The behavior of ambiguity premiums and probability premiums as the payoffs are varied depends on the nature of the modifications in utilities. Particular forms of the model that arise under different sets of assumptions about preferences include additive, bilinear, and ratio forms. We conclude with a brief example and some thoughts about potential generalizations and implications of the model.     

Socioeconomic status,perceived inequality of opportunity,and attitudes toward redistribution

Previous research suggests that an individual’s socioeconomic status (SES) is negatively associated with attitudes toward redistributive policies. The objective of this study is to examine whether the relationship between an individual’s subjective SES and his or her attitudes toward redistribution is contingent upon perceptions of inequality of opportunity. A series of multilevel analyses was performed using data from 28 countries from the 2009 International Social Survey Program (ISSP). Results revealed that the relationship between individual SES and attitudes toward redistribution was weaker among individuals who more strongly believed that success lies beyond the control of individuals. Shared perceptions of inequality of opportunity at the country level were also significant. The relationship between SES and attitudes toward redistribution was weaker in countries with higher levels of public perceptions of inequality of opportunity. In conclusion, people commensurately support redistribution policies (even contrary to their own self-interest) as they recognize the significance of inequality of opportunity. The greater the support among people for redistribution against their self-interest, the weaker the social cleavage in attitudes toward redistribution across different SES strata, and the higher the overall level of support for redistribution in society.     

Ambiguity aversion in multi-armed bandit problems

In multi-armed bandit problems, information acquired from experimentation is valuable because it tells the agent whether to select a particular option again in the future. This article tests whether people undervalue this information because they are ambiguity averse, or have a distaste for uncertainty about the average quality of each alternative. It is shown that ambiguity averse agents have lower than optimal Gittins indexes, appearing to undervalue information from experimentation, but are willing to pay more than ambiguity neutral agents to learn the true mean of the payoff distribution, appearing to overvalue objectively given information. This prediction is tested with a laboratory experiment that elicits a Gittins index and a willingness to pay on six two-armed bandits. Consistent with the predictions of ambiguity aversion, the Gittins indexes are significantly lower than optimal and willingnesses to pay are significantly higher than optimal.