Revealed Preferences for Risk and Ambiguity
We replicate the essentials of the Huettel et al. (2006) experiment on choice under uncertainty with 30 Yale undergraduates, where subjects make 200 pair-wise choices between risky and ambiguous lotteries. Inferences about the independence of economic preferences for risk and ambiguity are derived from estimation of a mixed logit model, where the choice probabilities are functions of two random eﬀects: the proxies for risk-aversion and ambiguity-aversion. [Our principal empirical ﬁnding is that we cannot reject the null hypothesis that risk and ambiguity are independent in economic choice under uncertainty. This ﬁnding is consistent with the hypothesized independence of the neural mechanisms governing economic choices under risk and ambiguity, suggested by the double dissociation-fMRI study reported in Huettel et al.
Brown, Donald J.; Erdman, Chandra; Ling, Kirsten; and Santos, Laurie, "Revealed Preferences for Risk and Ambiguity" (2010). Cowles Foundation Discussion Papers. 2115.