Comparing Ambiguous Urns with Different Sizes
29 Pages Posted: 12 Jun 2018 Last revised: 3 Oct 2019
Date Written: September 30, 2019
We use two-color Ellsberg urns to compare different ambiguous processes. By providing symmetric information on urns with different numbers of beads and keeping the most optimistic and pessimistic possibilities the same, we elicit subjects' preferences for the size of an ambiguous urn. Subjects prefer the bets from the ambiguous urns with more beads. Ambiguity averse subjects mainly drive this effect. We study the restrictions that our findings impose on the existing ambiguity models. Finally, we verify our experimental result with a mutual fund data.
Keywords: Ambiguity, Risk, Ratio Bias, Ellsberg's Experiment
JEL Classification: D01, D03, D80, D81
Suggested Citation: Suggested Citation