Partial Ambiguity

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