Partial Ambiguity

53 Pages Posted: 27 Feb 2013 Last revised: 9 Mar 2017

See all articles by Soo Hong Chew

Soo Hong Chew

National University of Singapore; National University of Singapore; HKUST

Bin Miao

Shanghai University of Finance and Economics - School of Economics

Songfa Zhong

National University of Singapore (NUS) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 28, 2016

Abstract

We extend Ellsberg's two-urn paradox and propose three symmetric forms of partial ambiguity by limiting the possible compositions in a deck of 100 red and black cards in three ways. Interval ambiguity involves a symmetric range of 50-n to 50 n red cards. Complementarily, disjoint ambiguity arises from two nonintersecting intervals of 0 to n and 100-n to 100 red cards. Two-point ambiguity involves n or 100-n red cards. We investigate experimentally attitudes towards partial ambiguity and the corresponding compound lotteries in which the possible compositions are drawn with equal objective probabilities. This yields three key findings: distinct attitudes towards the three forms of partial ambiguity, significant association across attitudes towards partial ambiguity and compound risk, and source preference between two-point ambiguity and two-point compound risk. Our findings help discriminate among models of ambiguity in the literature.

Keywords: risk, uncertainty, ambiguity, Ellsberg paradox, experiment, Choquet expected utility, maxmin expected utility, recursive non-expected utility, source preference

Suggested Citation

Chew, Soo Hong and Miao, Bin and Zhong, Songfa, Partial Ambiguity (November 28, 2016). Available at SSRN: https://ssrn.com/abstract=2225580 or http://dx.doi.org/10.2139/ssrn.2225580

Soo Hong Chew

National University of Singapore ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

National University of Singapore ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HKUST ( email )

Clear Water Bay
Kowloon, Hong Kong
China

Bin Miao

Shanghai University of Finance and Economics - School of Economics ( email )

777 Guoding Road
Shanghai, 200433
China

Songfa Zhong (Contact Author)

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

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