Allais at the Horse Race: Testing models of ambiguity aversion

Arbeitspapier

Most models of ambiguity aversion satisfy Anscombe-Aumann's Monotonicity axiom. This paper proposes a test of Monotonicity, the Allais Horse Race. It is an adaptation of the Allais paradox to a setting with both subjective and objective uncertainty. Viewed as a thought experiment, the Allais Horse Race allows for introspective assessment of Monotonicity. Implementing it as an incentivized experiment, we find that the modal choice of subjects violates Monotonicity in a specific, intuitive way. Overall, we find that models of ambiguity aversion that satisfy Monotonicity cannot describe the behavior of about half of all subjects.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 207

Classification and Topics

• Classification: Wirtschaft ; Criteria for Decision-Making under Risk and Uncertainty
• Subject: ambiguity aversion ; monotonicity ; Anscombe-Aumann ; Allais paradox ; experiments

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schneider, Florian ; Schonger, Martin
• Event: Veröffentlichung
• (who): University of Zurich, Department of Economics
• (where): Zurich
• (when): 2015

Further information

• DOI: doi:10.5167/uzh-113552
• Handle: http://hdl.handle.net/10419/126604
• Last update: 10.03.2025, 11:44 AM CET