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Betting on Machina's reflection example: an experiment on ambiguity

Author

Listed:
  • Olivier L'Haridon

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, UP4 - Université Paris-Sorbonne)

  • Laetitia Placido

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract
In a recent article, Machina (Am Econ Rev forthcoming, 2008) suggested choice problems in the spirit of Ellsberg (Q J Econ 75:643-669, 1961), which challenge tail-separability, an implication of Choquet expected utility (CEU), to a similar extent as the Ellsberg paradox challenged the sure-thing principle implied by subjective expected utility (SEU). We have tested choice behavior for bets on one of Machina's choice problems, the reflection example. Our results indicate that tail-separability is violated by a large majority of subjects (over 70% of the sample). These empirical findings complement the theoretical analysis of Machina (Am Econ Rev forthcoming, 2008) and, together, they confirm the need for new approaches in the analysis of ambiguity for decision making.

Suggested Citation

  • Olivier L'Haridon & Laetitia Placido, 2010. "Betting on Machina's reflection example: an experiment on ambiguity," PSE-Ecole d'économie de Paris (Postprint) hal-00528380, HAL.
    • Handle: RePEc:hal:pseptp:hal-00528380
    DOI: 10.1007/s11238-008-9128-9
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Choquet expected utility; Experimental economics; Ambiguity;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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