Management Science Vol. 62 No. 5 2016

Ambiguity Attitudes in a Large Representative Sample

Stephen G. Dimmock¹; Roy Kouwenberg²; Peter P. Wakker³

¹ Nanyang Business School, Nanyang Technological University, Singapore 639798 · ² College of Management, Mahidol University, Bangkok 10400, Thailand; and Erasmus School of Economics, Erasmus University Rotterdam, 3000 DR Rotterdam, Netherlands · ³ Erasmus School of Economics, Erasmus University Rotterdam, 3000 DR Rotterdam, Netherlands

Abstract

Using a theorem showing that matching probabilities of ambiguous events can capture ambiguity attitudes, we introduce a tractable method for measuring ambiguity attitudes and apply it in a large representative sample. In addition to ambiguity aversion, we confirm an ambiguity component recently found in laboratory studies: a-insensitivity, the tendency to treat subjective likelihoods as 50-50, thus overweighting extreme events. Our ambiguity measurements are associated with real economic decisions; specifically, a-insensitivity is negatively related to stock market participation. Ambiguity aversion is also negatively related to stock market participation, but only for subjects who perceive stock returns as highly ambiguous.

DOI

10.1287/mnsc.2015.2198

Volume

62

Issue

5

Pages

1363-1380

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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