A Bayesian Approach to Uncertainty Aversion

The Ellsberg paradox demonstrates that people's beliefs over uncertain events might not be representable by subjective probability. We show that if a risk averse decision maker, who has a well defined Bayesian prior, perceives an Ellsberg type decision problem as possibly composed of a bundle of several positively correlated problems, she will be uncertainty averse. We generalize this argument and derive sufficient conditions for uncertainty aversion.     

Experimental elicitation of ambiguity attitude using the random incentive system

Experimental Economics - We demonstrate how the standard usage of the random incentive system in ambiguity experiments eliciting certainty and probability equivalents might not be incentive...