Monday, September 4, 2017

Liu and Onculer (2017) on Ambiguity Attitudes

Yuanyuan Liu and Ayse Onculer, “Ambiguity Attitudes over Time.” Journal of Behavioral Decision Making 30: 80-88, 2017. 

• Ambiguity aversion is not uncommon when dealing with relatively high-probability gains; ambiguity neutrality or even ambiguity seeking comes into play for low-probability gains. (Ambiguity attitudes can be quite different for loss settings or for mixed gain-loss scenarios.)

• This article investigates whether delayed resolution of uncertainty changes attitudes towards ambiguity. The authors find that a one-year delay tends to undermine ambiguity aversion in those high-probability gains scenarios. 

• Liu and Onculer propose that for immediate prospects, the affective system (Kahneman’s system 1) makes the call, but that in asking people to think about risks with future resolution, the cognitive (system 2) tends to take over, and dissipates the ambiguity aversion that appears in the high-probability condition. 

• For low-probability gains, system 2 is in charge even for immediate prospects, so delay has no effect on ambiguity attitudes.

• Affect can influence decision making. Likely events tend to be psychologically closer than unlikely ones, increasing reliance upon affective decision making. Likewise, immediacy also triggers affective decision making. Temporal distance, alternatively, will privilege cognitive decision making.

• The authors posit that for immediate decisions concerning high-probability gains, ambiguity aversion is present, but for low-probability gains, ambiguity aversion or a weak preference for ambiguity emerges. If the resolution of the prospects is delayed, then ambiguity aversion towards high-probability gains will be reduced, with no effect on low-probability gains.

• Priming subjects to adopt a cognitive decision-making style will reduce ambiguity aversion for high-probability prospects. Alternatively, for temporally distant prospects, priming subjects to use an affective style will increase ambiguity aversion for the high-probability prospects. 

 In a series of three web-based urn-problem surveys, the authors find support for their hypotheses.

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