Heath and Tversky (1991) posed that reaction to ambiguity is driven by perceived competence. Competence effects may be inconsistent with ambiguity aversion if betting on own judgement is preferred to betting on a chance event, because judgemental probabilities are more ambiguous than chance events. This laboratory experiment analyses whether ambiguity affects prices and volumes in a double auction market, and contrasts ambiguity aversion to competence effects. In order to test for the presence of competence effects, in the experiment uncertainty is tied to the realization of events about which the decision maker is more or less knowledgeable. Two experiments are presented: in the first, knowledge is exogenous, whereas in the second the knowledge judgement is endogenous. Market prices provide evidence in favour of the competence hypothesis only when competence is self-assessed. Comparable volumes are observed in both experiments.
Uncertainty aversion vs. competence: an experimental market study
DI MAURO, Carmela
2008-01-01
Abstract
Heath and Tversky (1991) posed that reaction to ambiguity is driven by perceived competence. Competence effects may be inconsistent with ambiguity aversion if betting on own judgement is preferred to betting on a chance event, because judgemental probabilities are more ambiguous than chance events. This laboratory experiment analyses whether ambiguity affects prices and volumes in a double auction market, and contrasts ambiguity aversion to competence effects. In order to test for the presence of competence effects, in the experiment uncertainty is tied to the realization of events about which the decision maker is more or less knowledgeable. Two experiments are presented: in the first, knowledge is exogenous, whereas in the second the knowledge judgement is endogenous. Market prices provide evidence in favour of the competence hypothesis only when competence is self-assessed. Comparable volumes are observed in both experiments.File | Dimensione | Formato | |
---|---|---|---|
DiMauro_TD2008.pdf
solo gestori archivio
Tipologia:
Versione Editoriale (PDF)
Licenza:
NON PUBBLICO - Accesso privato/ristretto
Dimensione
293.22 kB
Formato
Adobe PDF
|
293.22 kB | Adobe PDF | Visualizza/Apri |
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.