The strength of sensitivity to ambiguity

We report an experiment where each subject’s ambiguity sensitivity is measured by an ambiguity premium, a concept analogous to and comparable with a risk premium. In our design, some tasks feature known objective risks and others uncertainty about which subjects have imperfect, heterogeneous, information (“ambiguous tasks”). We show how the smooth ambiguity model can be used to calculate ambiguity premia. A distinctive feature of our approach is estimation of each subject’s subjective beliefs about the uncertainty in ambiguous tasks. We find considerable heterogeneity among subjects in beliefs and ambiguity premia; and that, on average, ambiguity sensitivity is about as strong as risk sensitivity.     

Are bygones bygones?

This article reports an experiment which tests the principle of separability, i.e. that behaviour in a dynamic choice problem is independent of history and of unreachable eventualities. Although this is a well-known principle of orthodox decision theory and central to conventional economic modelling, it has been questioned on grounds suggested by non-expected utility models of choice under risk and by the psychology of affective influences on risk-taking. Our experimental design, which provides between-subjects tests of separability using three treatments in which the history preceding a decision is manipulated, is inspired by these concerns. We expose separability to a clean and harsh test, but find no evidence that it is violated.     

Refinements of Nash Equilibrium: A critique

Rational play of Noncooperative Games is investigated under the assumptions that a particular form of Best Reply Principle holds, each player has at least one rational strategy and all strategies are either rational or irrational. These assumptions are shown to imply that (a) some weakly dominated strategies are rational (b) recursive reasoning can be misleading (c) only a Strict Nash Equilibrium can be a solution. A Supplementary Best Reply Principle is formulated. It sheds further light on which games have solutions and on rational play in games without them. The relationship between these results and those of other authors is discussed.     

Book reviews

Steven E. Aschheim, Brothers and Strangers. The East European Jew in German and German Jewish Consciousness, 1800–1923 (Madison, University of Wisconsin Press, 1982). Pp.xiv + 331. $25.00.

Ezra Mendelsohn, The Jews of East Central Europe Between the World Wars (Bloomington and London, Indiana University Press, 1983). Pp. 300. £19.25.

Hans van Amersfoort, Immigration and the Formation of Minority Groups: The Dutch Experience 1945–1975 (Cambridge, Cambridge University Press, 1982). Pp.vi + 243. £19.50. (Translated from the Dutch by Robert Lyng).

Centre for Contemporary Cultural Studies, The Empire Strikes Back: Race and Racism in ‘70s Britain (London, Hutchinson University Library, 1982). Pp.324. £5.95.

Susan Benson, Ambiguous Ethnicity: Interracial Families in London (Cambridge, Cambridge University Press, 1982). Pp.xi + 172. £16.50 (hardback); £5.50 (paperback).

Ashok Ohri, Basil Manning and Paul Curno (eds.), Community Work and Racism: Community Work Seven (London, Routledge &; Kegan Paul, 1982). Pp.xv+188. £5.95.

Harold Pollins, Economic History of the Jews in England (London, Associated University Presses, 1983). Pp.339. £20.

Australian Council on Population and Ethnic Affairs, Multiculturalism for All Australians (Canberra, Australian Government Publishing Service, 1982). Pp.54. NP.

Peter D. Osborne, The Other Australia: The Crisis in Aboriginal Health (Occasional Monograph 2, Department of Political Science, University of Tasmania, Hobart, 1982). Pp.144. NP.

J.W. Blassingame (ed.), The Frederick Douglass Papers: Series One, Volume 2: 1847–54, Speeches, Debates and Interviews (New Haven, CT, Yale University Press, 1983). Pp.616. £38.

Robert Ross, Cape of Torments: Slavery and Resistance in South Africa (London, Routledge &; Kegan Paul, 1983). Pp.xi + 160. £9.50.     

Dynamic Decision-Making Under Uncertainty: An Experimental Investigation of Choices Between Accumulator Gambles

This paper presents an experiment that is designed to be more effective than previous studies at reproducing in the laboratory the affective experiences of risk-taking, such as hope, fear, thrill, pain of loss, regret, disappointment or elation. The use of dynamic choice problems involving accumulator gambles, and a particular randomisation device to resolve them, are central to the design. Our results both are inconsistent with orthodox dynamic choice theory and cast doubt on the generality of effects observed in previous designs. We discuss these findings, in terms of the relative impacts on behaviour of affective experience and judgement.