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e propose that ambiguity aversion, as introduced in the literature on decision making under uncertainty, drives a preference for established brands in multiattribute choices among branded alternatives. Estab- lished brands are those for which belief in quality is held with greater confidence, even if specific attributes might be inferior to those o...
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... Moreover, ambiguity aversion was suggested as an explanation for the equity risk premium puzzle, leading to a premium on top of the usual risk premium due to the unknown return distribution of stocks (Chen and Epstein, 2002;Barillas et al., 2009). In marketing, ambiguity aversion was linked to a preference for established brands (Muthukrishnan et al., 2009), and Kahna and Sarin (1988) presented a model for understanding consumer choices under ambiguity, predicting different decisions for heterogeneous groups. In the transportation domain, Qi et al. (2016) introduced a criterion to evaluate travel time under risk and ambiguity, highlighting that the path minimizing travel time under this criterion is essentially a shortest path problem. ...
Ridesplitting, despite having been around for years, accounts for a low proportion of overall transportation modes. With the development of technology, app-based ridesplitting is witnessing new opportunities but its usage rate still remains poor. Intuitively, travelers’ aversion to the unreliable travel time inherent of ridesplitting may stop them from choosing it. Many studies have explored the role of risk aversion, but fewer focus on ambiguity aversion. In this study, we aim to understand travelers’ preferences for information ambiguity in shaping their choice behavior of using app-based ridesplitting. Therefore, we built up choice models of this thought to describe travelers’ behaviors in ridesplitting. Based on the models, a two-stage framework was established including field data research and experimental research testing the existence of ambiguity aversion. In the first stage, a data set containing detailed information on nearly 2.2 million trips in Chengdu, China was utilized. By the maximum likelihood method, the fitting level of unreliability model is better and the coefficient of ambiguity attitude shows the existence of ambiguity aversion. In the second stage, a stated choice experiment was designed with a variety of choice tasks to reproduce real-life scenarios. Significantly fewer ridesplitting cases happen in the ambiguous information treatment than in the certain information treatment, but risky information does not reduce the number of choosing ridesplitting significantly. The results undergo cross-validation with field research data to ensure their reliability. This study leverages travelers’ aversion to ambiguity to explain their reluctance towards ridesplitting. The findings have strong implications for relevant service platforms to prompt more travelers towards participating in ridesplitting, for example enhancing the provision of travel information to address the concerns of potential users.
... As noted by Trautmann and Van De Kuilen (2015), little is known about the expected relationship between Ellsberg's ambiguity attitude and behaviors outside laboratories. Although Muthukrishnan et al. (2009), Dominiak et al. (2012, and Engle-Warnick et al. (2007) provide evidence to support the expected relationship, literature is uncertain about the extent to which ambiguity aversion in the ball experiment affects our activities outside laboratories. ...
Who knows the underlying productivity distribution function? Interestingly, this ambiguous function is often referenced to make decisions including job creations, wage determinations, contract formulations, etc. To investigate how ambiguity shapes labor markets, we integrate ambiguity preferences into the Diamond‐Mortensen‐Pissarides (DMP) model. We find that ambiguity‐averse job‐ and talent‐hunters are conservative. Our quantitative analysis indicates that but for the ambiguity, the American unemployment rate would have increased in the postwar era. This paper generalizes the DMP model, enhances our understanding of the labor market, and calls for policies concerning labor market information.
... Of note, the primary Pro/ Con task was conducted with real monetary consequences, suggesting that it may at least extend to other forms of financial behavior. Furthermore, differences in (lab-measured) ambiguity aversion have been shown to correlate with other forms of decision-making (Muthukrishnan et al., 2009), as well as facets of psychiatric diagnoses (Buckholtz et al., 2017;Ruderman et al., 2016), suggesting their usefulness in understanding a wider range of behavior. However, uncertainty preferences can indeed be domain-specific (Blais & Weber, 2006), and further examination would help to define the appropriate range of generalization possible from these effects. ...
Decision-makers often are faced with uncertain situations in which they have incomplete information. While risky decisions include the probabilities of the possible outcomes, ambiguous decisions involve both unknown probabilities and unknown outcomes. Prior research has suggested that there are differences in how men and women evaluate risk, but evidence related to gender and ambiguity is mixed. The present work approaches this problem from a novel angle, focusing on the use of information that is present rather than the impact of information that is absent. It examines how individuals assign value in uncertain decisions based on the partial information they do have. While a main effect of gender on value is not observed, there is an enhanced “optimism bias” in how both favorable and unfavorable information influences the subjective value of ambiguous financial prospects for male compared to female participants. Unpacking these effects suggests multiple mechanisms, including a significant contribution of risk processing. Specifically, favorable and unfavorable information are over- and underweighted respectively in male participants’ estimated likelihood of a winning outcome, and unfavorable information is underweighted in estimating certainty. There also is an interaction of gender and risk preferences, such that value increases more for male participants as the subjectively estimated likelihood of winning increases. A second experiment demonstrates this risk interaction effect is also observed for objective probabilities of winning, suggesting that the relationship between value and risk uses similar mechanisms across layers of uncertainty.
... This was done to avoid order effects. Although the use of an incidental manipulation indirectly related to the dependent variable might seem problematic for ecological validity, this practice is fairly common in the scarcity (e.g., Mani et al., 2013) and familiarity bias literatures (e.g., Muthukrishnan et al., 2009). ...
As economic inequality increases in the United States and around the world, psychologists have begun to study how the psychological experience of scarcity impacts people's decision making. Recent work in psychology suggests that scarcity—the experience of having insufficient resources to accomplish a goal—makes people more strongly prefer what they already like relative to what they already dislike or like less. That is, scarcity may polarize preferences. One common preference is the preference for familiarity: the systematic liking of more often experienced stimuli, compared to less often experienced stimuli. Across four studies—three experiments and one cross- sectional survey (all pre-registered; see https://osf.io/7zyfr/)—we investigated whether scarcity polarizes the preference for familiarity. Despite consistently replicating people's preference for the familiar, we consistently failed to show that scarcity increased the degree to which people preferred the familiar to the unfamiliar. We discuss these results in light of recent failures to replicate famous findings in the scarcity literature.
... Peer effects, observable when individuals make choices jointly with others, also moderate ambiguity attitudes. Particularly, the observation of our own choice by others increases AA (Muthukrishnan et al., 2009;Trautmann et al., 2008). Similarly, people do not believe others to be ambiguity-neutral (Slovich and Tversky, 1974) and expect them to be ambiguityaverse . ...
Ambiguity seems to be ... an ambiguous concept. While it has received attention from researchers from many disciplines, scientists from different backgrounds have put forward divergent, often vague and contrasting definitions of ambiguity. This conceptual impasse has somewhat obstructed cross-fertilization of insights across disciplines and has slowed the convergence of the results. Here, we examine the literature from economics and psychology, trace a map of intellectual knowledge on ambiguity in both disciplines and highlight open questions. Finally, we discuss some recent theoretical developments that could offer a unifying frame of reference for the study of ambiguity. JEL Classification: D80 ; D81 ; D91
... Given the genetic stratification of consumers into the familiarity seeking versus those who are familiarity neutral, the firm may seek to deliver better quality and performance for the former and invest more in brand equity to ameliorate the perception of uncertainty. This may help explain the differential receptiveness of new brands or products in different populations on top of the cultural influence (Muthukrishnan et al., 2009). ...
Source preference in which equally distributed risks may be valued differently has been receiving increasing attention. Using subjects recruited in Berkeley, Fox and Tversky (1995) demonstrate a familiarity bias in source preference—betting on a less than even-chance event based on San Francisco temperature is valued more than betting on a better than even-chance event based on Istanbul temperature. Neophobia is associated with the amygdala which is GABA-rich and is known to be modulated by benzodiazepines as anxiolytic agents that enhance the activity of the GABAA receptor in processing anxiety and fear. This leads to our hypothesis that familiarity bias in decision making may be explained by polymorphic variations in this receptor mediated by anxiety regulation in the amygdala. In two companion studies involving Beijing-based subjects, we examine 10 single nucleotide polymorphisms (SNPs) of GABRB2 (coding for GABAA receptor, beta 2 subunit) and find 7 SNPs each showing negative association between familiarity bias—preference for betting on parity of Beijing temperature over Tokyo temperature—and having at least one minor allele (less than 50% prevalence). In an imaging genetics study of a subsample of subjects based on the SNP with the most balanced allelic distribution, we find that subjects’ familiarity bias in terms of risk aversion towards bets on the parity of the temperature of 20 Chinese cities is negatively associated with their post-scanning familiarity ratings of the cities only for those with no minor allele in this SNP. Moreover, familiarity bias is positively associated with activation in the right amygdala along with the brain’s attention networks. Overall, our findings help discriminate between ambiguity aversion and familiarity bias in source preference and supports our gene–brain–behavior hypothesis of GABAergic modulation of amygdala activation in response to familiarity towards the source of uncertainty.
... In addition to factors such as education, credit constraints, and learning spill over (Huffman, 2001;Sunding & Zilberman, 2001;Barrett et al., 2004;Aldana et al., 2011), attitude toward uncertainty is considered an important determinant of the decision to adopt agricultural technology where, as the behavioral attribute, an individual"s risk preference has been consistently given the prime focus (Feder et al., 1985;Bar-Shira, Just & Zilberman, 1997;Barsky et al., 1997;Liu, 2013;Barham et al., 2014;Noussair, Trautmann & Kuilen, 2014;Ward & Singh, 2014). The role of ambiguity aversion, another type of preference related to uncertainty that is relatively less studied, is also gaining focus in a growing literature (Sarin & Winkler, 1992;Sarin & Weber, 1993;Halevy, 2007;Muthukrishnan, Wathieu & Xu, 2009;Dimmock, Kouwenberg, & Wakker, 2016). 1 If any difference exists between the effects of the two on an individual"s decisionmaking, then it has important policy implications (Barham et al., 2014). Additionally, communication with others may impact an individual"s subjective beliefs about the associated uncertainty and therefore can change her/ his behavior (Cooper and Rege, 2011;Heinrich and Mayrhofer, 2018). ...
In this paper, we conduct lab-in-field experiments using a sample of 206 farmers in Bangladesh and perform four main tasks related to measuring the farmers’ attitudes toward risk and ambiguity in both gain and loss domains: (i) measure the effect of communication and group members’ characteristics on risk and ambiguity attitudes, (ii) investigate the effect of group selection on risk and ambiguity attitudes, (iii) investigate the effect of seasonal variation on risk and ambiguity attitudes, and (iv) study the gender disparity in the measured attitudes in different environments. Our experiments yield the following key results. First, farmers exhibit higher risk and ambiguity aversions when they make choices in groups compared to choosing alone. In addition, group members’ characteristics such as social stature, literacy, etc. are important factors that influence farmers’ measured behavioral attributes after communication. Second, farmers are less risk-averse but more ambiguity-averse when group members are self-selected relative to when they are randomly assigned. Third, farmers in our sample are substantially more risk averse during the pre-harvest season compared to the post-harvest season. Finally, women tend to be more risk and ambiguity averse than men in all dimensions as male farmers tend to make more extreme choices than females.
... This does not correspond to the review by Goyal and Kumar (2021), who observe 86% empirical studies, 10% conceptual studies, 3% reviews, and 1% meta-analyses on financial literacy from 2000 to 2019. But also in the field of ambiguity aversion, empirical and experimental studies have been gaining ground from the 2000s onwards (Dimmock et al. 2016b(Dimmock et al. , 2016aKoudstaal et al. 2016;Muthukrishnan et al. 2009;Sutter et al. 2013). The low proportion of qualitative studies is striking. ...
... Using in-depth individual interviews to gain more information about the decisionmaker's choices, they find evidence for ambiguity seeking rather than aversion. Muthukrishnan et al. (2009) analyze the tendency of customers to prefer wellknown over unknown brands. They observe that ambiguity-averse subjects prefer established brands, even if the product specifications are inferior compared to the unknown brands. ...
We conduct a bibliometric analysis and review the literature of the last six decades on ambiguity aversion. Comparing trends in theoretical, experimental, and empirical contributions, our study presents the main aspects that are discussed in this literature. We show the increasing relevance of ambiguity aversion for decision-making research and discuss factors influencing attitudes on ambiguity. Our literature review reveals unsolved problems in the research on ambiguity and gives an outlook on new ventures for future research.
... For example, reduced planning, preparation, and product testing are believed to make such products more vulnerable to product failure, which seems particularly troublesome for high risk situations (#23, #24). Our theorizing is also consistent with research documenting a consumer preference for established and familiar options when making decisions under uncertain and stressful circumstances, because such options signal safety (e.g., De Vries et al. 2010;Litt et al. 2011;Muthukrishnan, Wathieu, and Xu 2009). ...
Crowdfunding has emerged as an alternative means of financing new ventures by utilizing the financial support of a large group of individual investors. In this research, we ask a novel question: does being crowdfunded carry any signal value for the broader market of observing consumers? Seven studies reveal a consumer preference for “crowdfunded products”, even after controlling for a product’s objective product characteristics. We identify two inferences that help explain this effect: (1) consumers perceive crowdfunded products to be of higher quality, and (2) they believe that supporting crowdfunding reduces inequality in the marketplace. We further document an important boundary condition of the first inference: our identified effect reverses in high risk domains (e.g., products that involve high physical risk), due to consumer perceptions that the crowdfunding model lacks sufficient professionalism to mitigate risk. With regard to the second inference, we find that the positive crowdfunding effect is particularly strong among consumers who value social equality. Taken together, our work sheds new light on consumer perceptions of crowdfunding, elucidates why and when consumers prefer crowdfunded products, and offers actionable implications for managers.
... Four main interpretations have been proposed for why the simple risky lottery is preferred leveraged to explain a wide range of phenomena such as portfolio choices and asset prices (Dow and da Costa Werlang, 1992;Gollier, 2011), insurance transactions (Hogarth and Kunreuther, 1985;Alary et al., 2013), incomplete contracts (Mukerji, 1998), financial markets (Mukerji and Tallon, 2001), brand choice (Muthukrishnan et al., 2009), vaccination decisions (Ritov and Baron, 1990), and strategic choice in games (Pulford and Colman, 2007;Vives and Feldman Hall, 2018). ...
