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  • updating under ambiguity-GEB_rev2

    Rights statement: This is the author’s version of a work that was accepted for publication in Games and Economic Behavior. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Games and Economic Behavior, 127, 2021 DOI: 10.1016/j.geb.2021.02.002

    Accepted author manuscript, 798 KB, PDF document

    Embargo ends: 17/08/22

    Available under license: CC BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License

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Dynamic Decision Making under Ambiguity: an Experimental Investigation

Research output: Contribution to journalJournal articlepeer-review

E-pub ahead of print
<mark>Journal publication date</mark>1/05/2021
<mark>Journal</mark>Games and Economic Behavior
Volume127
Number of pages19
Pages (from-to)28-46
Publication StatusE-pub ahead of print
Early online date17/02/21
<mark>Original language</mark>English

Abstract

Neoclassical economic theory assumes that whenever agents tackle dynamic decisions under ambiguity, preferences are represented by the Subjective Expected Utility (SEU) model and prior beliefs are updated according to Bayes rule, upon the arrival of partial information. Nevertheless, when one considers non-neutral ambiguity attitudes, either the axiom of dynamic consistency or of consequentialism should be relaxed. Using data from an economic experiment on dynamic choice under ambiguity, we study which of the two rationality axioms people violate, along with the question of whether this violation is part of a conscious planning strategy or not. The combination of the two, allows us to classify non-SEU subjects to three behavioural types: resolute, naïve and sophisticated. The hypothesis of Bayesian updating is rejected for more than half of the experimental population. For ambiguity non-neutral subjects, we find that the majority are sophisticated, a few are naïve and very few are resolute.

Bibliographic note

This is the author’s version of a work that was accepted for publication in Games and Economic Behavior. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Games and Economic Behavior, 127, 2021 DOI: 10.1016/j.geb.2021.02.002