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Are Ambiguity Preferences Aligned with Risk Preferences?

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Decisions under risk and ambiguity are frequently encountered nowadays, and associated preferences are frequently quantified. This article deals with the relationship between individuals’ preferences towards risk and ambiguity. In particular, we question the correlation of the preferences and their alignment. For that purpose, we analyze experimental data that measures individuals’ risk and ambiguity preferences through a lottery choice experiment. The results indicate that risk preferences and ambiguity preferences are positively correlated. In addition, we show that most of the subjects have preferences towards ambiguity that are aligned with those towards risk, either perfectly or weakly. Only 15% of the sample has preferences towards ambiguity that are the opposite of those towards risk.

Elsevier BV

Stéphane Couture Kene Boun My Marielle Brunette Sarah Van Driessche

Title: Are Ambiguity Preferences Aligned with Risk Preferences?

Description:

Decisions under risk and ambiguity are frequently encountered nowadays, and associated preferences are frequently quantified.

This article deals with the relationship between individuals’ preferences towards risk and ambiguity.

In particular, we question the correlation of the preferences and their alignment.

For that purpose, we analyze experimental data that measures individuals’ risk and ambiguity preferences through a lottery choice experiment.

The results indicate that risk preferences and ambiguity preferences are positively correlated.

In addition, we show that most of the subjects have preferences towards ambiguity that are aligned with those towards risk, either perfectly or weakly.

Only 15% of the sample has preferences towards ambiguity that are the opposite of those towards risk.

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