Experimental Studies on Ambiguity and Ambiguity Aversion

Projekt Start:01/2013
Forscher:Jan Pieter Krahnen
Kategorie: Financial Intermediation, Transparency Lab, Experiment Center
Finanziert von:LOEWE

Topic & Objectives

Unlike in most existing models on financial markets, it is unrealistic to assume that market participants know exact probabilities of the states of the world. How do market participants deal with ambiguity? How does uncertainty regarding the distribution of risks in the financial system affect financial stability? The financial crisis has demonstrated possible consequences of imperfect information. The goal of this project is a theoretical and experimental analysis of the impact of ambiguous information about probabilities on market participants, price evolution, and the financial system. A systematic analysis of individual attitudes towards ambiguity has been done based on laboratory experiments.

Key Findings

  • Ambiguity aversion is on average much more pronounced than human aversion against risk.
  • Our results provide evidence that maxmin expected utility does not adequately capture individual attitudes towards ambiguity.

Zugehörige Working Papers

55Jan Pieter Krahnen, Peter Ockenfels, Christian WildeMeasuring Ambiguity Aversion: A Systematic Experimental Approach2014 Financial Intermediation, Transparency Lab, Experiment Center ambiguity, valuation discount, experimental economics