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Measuring Beliefs and Ambiguity Attitudes Towards Discrete Sources of Uncertainty

Yao Thibaut Kpegli, Maria Alejandra Erazo Diaz, Working paper GATE 2022-12
This paper proposes a new method to measure beliefs and ambiguity attitudes towards events that are not necessarily equally likely and belong to a discrete set (i.e., discrete sources of uncertainty). Our method increases robustness to misspecification and allows flexibility in parametric choices compared to previous methods. We implement our method experimentally to both equal and different sources of uncertainty in two contexts : trust and coordination games. We find two main results. First, for equal sources of uncertainty, our method successfully reveals that subjects have context-independent beliefs on events, but context-dependent utility and weighting functions. This result indicates that comparing different sources of uncertainty requires a complete measurement of the utility and weighting functions. Second, different sources of uncertainty where the events are not equally likely lead to an increase in likelihood insensitivity, which indicates that the beliefs formation process of unknown events is cognitively demanding.

Measuring strategic-uncertainty attitudes

Lisa Bruttel, Muhammed Bulutay, Camille Cornand, Frank Heinemann, Adam Zylbersztejn, Working paper GATE 2022-11
Strategic uncertainty is the uncertainty that players face with respect to the purposeful behavior of other players in an interactive decision situation. Our paper develops a new method for measuring strategic-uncertainty attitudes and distinguishing them from risk and ambiguity attitudes. We vary the source of uncertainty (whether strategic or not) across conditions in a ceteris paribus manner. We elicit certainty equivalents of participating in two strategic 2x2 games (a stag-hunt and a market-entry game) as well as certainty equivalents of related lotteries that yield the same possible payoffs with exogenously given probabilities (risk) and lotteries with unknown probabilities (ambiguity). We provide a structural model of uncertainty attitudes that allows us to measure a preference for or an aversion against the source of uncertainty, as well as optimism or pessimism regarding the desired outcome. We document systematic attitudes towards strategic uncertainty that vary across contexts. Under strategic complementarity [substitutability], the majority of participants tend to be pessimistic [optimistic] regarding the desired outcome. However, preferences for the source of uncertainty are distributed around zero.