Applied Seminar

Judit Alonso

Universidad de Alicante


Seminar 3 – 14:30


Making decisions under uncertainty is a usual issue in our daily life. In our individual decision problems, we face uncertainty when we are in a risky or in an ambiguous situation. This uncertainty can appear through different dimensions: the amount of monetary earnings, the likelihood of receiving those earnings and the time when you receive them. How subjects behave under uncertainty has been extensively studied by the literature. Some recent literature has studied subjects’ preferences on simple versus multiple dimensions of uncertainty. However, little is known about the subjects’ perception of uncertainty depending on the dimension it enters through. The goal of this paper is to gain some understanding of how individuals perceive uncertainty (risk and/or ambiguity) depending on where this uncertainty is present: prizes, probabilities or time. To approach this question, I propose an experimental design based on certainty equivalent elicitation of lotteries where we analyze the case of risk (as baseline), compound risk and ambiguity.

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