The classical Ellsberg experiment presents individuals with a choice problem in which the probability of winning a prize is unknown (uncertain). In this paper, we study how individuals make choices between gambles in which the uncertainty is in different dimensions: the winning probability, the amount of the prize, the payment date, and the combinations thereof. Although the decision-theoretic models accommodate a rich variety of behaviors, we present experimental evidence that points at systematic behavioral patterns: (i) no uncertainty is preferred to uncertainty on any single dimension and to uncertainty on multiple dimensions, and (ii) "correlated" uncertainty on multiple dimensions is preferred to uncertainty on any single dimension.
- Ellsberg paradox
- Multidimensional uncertainty
- Uncertainty aversion
All Science Journal Classification (ASJC) codes
- Strategy and Management
- Management Science and Operations Research