An Examination of Ambiguity Aversion: Are Two Heads Better Than One?
- Ambiguity aversion has been widely observed in individuals' judgments. The experiment examines risky and cautious shifts from individuals' original judgments to their judgments when they are paired up in dyads.
- In the experiment the participants were first asked to specify individually their willingness-to-pay for six monetary gambles. They were then paired at random into dyads, and were asked to specify their willingness-to-pay amount for the same gambles. The dyad's willingness-to-pay amount was to be shared equally by the two individuals. Of the six gambles in our experiment, one involved no ambiguity and the remaining five involved different degrees of ambiguity. It is found that dyads exhibited risk aversion as well as ambiguity aversion. The majority of the dyads exhibited a cautious shift in the face of ambiguity, stating a smaller willingness-to-pay than the two individuals' average.
- People pay less under ambiguous situations when compared to a corresponding unambiguous situation (Scenario 2 vs. Scenario 1). Similarly, they pay less for more ambiguous situations as compared to less ambiguous situations (Scenarios 4 vs. 3 and 6 vs. 5).
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