Ruhr Economic Papers

Ruhr Economic Papers #488

Information Acquisition and Decisions under Risk and Ambiguity

by Ralf Bergheim

RUB, 05/2014, 48 S./p., 8 Euro, ISBN 978-3-86788-556-0 DOI: 10.4419/86788556

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Abstract

This paper experimentally investigates individual information acquisition and decisions in ambiguous situations in which the degree of ambiguity can endogenously and individually be decreased by the subjects. In particular, I analyze how risk aversion, ambiguity attitude and personality traits are related to an individual’s information acquisition prior to a decision and to the decision itself based on this information. I focus on urn decisions and conduct treatments that consider the loss and gain domain separately and that vary the amount of available information and the probabilistic structure. I find that risk and ambiguity aversion affect the information acquisition but are less influential for the decisions between two ambiguous urns according to several heuristics. In contrast, personality traits and an individual’s primary decision type turn out to have an impact on both information acquisition and decisions. I observe that under this study’s presentation format the reflection effect is reversed for negative and positive payoffs in low probability treatments compared to corresponding results under a descriptive presentation format.

JEL-Classification: C91, D03, D81

Keywords: Ambiguity aversion; risk aversion; experiment; decision making; information acquisition; personality traits

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