Linking Attitudes towards Sources of Uncertainty

57 Pages Posted: 28 Mar 2022

See all articles by Soo Hong Chew

Soo Hong Chew

Southwestern University of Finance and Economics; National University of Singapore

Bin Miao

Renmin University of China, School of Economics

Songfa Zhong

National University of Singapore (NUS) - Department of Economics

Date Written: February 23, 2022

Abstract

Two distinct interpretations of ambiguity attitudes have been proposed, namely, weighting the multiple priors pessimistically and exhibiting preference over different sources of uncertainty. This study examines the links among attitudes towards three sources of uncertainty including ambiguity and its corresponding compound risk as well as almost-objective uncertainty. In two experiments, we show that the pair-wise correlations among the three are significant and sizable, and the observed correlations are robust with respect to the valence of the outcomes and to the degree of likelihood. Our findings point to a shared link across domains of uncertainty and motivate the need for further theoretical development.

Keywords: Ambiguity, Source preference, Maxmin expected utility, Recursive utility, Experiment

JEL Classification: C91, D81

Suggested Citation

Chew, Soo Hong and Miao, Bin and Zhong, Songfa, Linking Attitudes towards Sources of Uncertainty (February 23, 2022). Available at SSRN: https://ssrn.com/abstract=4041948 or http://dx.doi.org/10.2139/ssrn.4041948

Soo Hong Chew

Southwestern University of Finance and Economics ( email )

Hong Yuan Building
Chengdu, Sichuan 631000
China

National University of Singapore ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

Bin Miao (Contact Author)

Renmin University of China, School of Economics ( email )

China

Songfa Zhong

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

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

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