Working Paper BETA #2023-10

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Title : More Ambiguous or More Complex? An Investigation of Individual Preferences under Uncertainty

Author(s) : Ilke Aydogan, Loïc Berger, Vincent Théroude

Abstract : This paper explores the drivers of individual preferences under uncertainty. We propose a characterization of the situations of model uncertainty such as the ones introduced by Ellsberg (1961) by building on the more ambiguous relations of Jewitt and Mukerji (2017) and Izhakian (2020) and on two new more complex relations. Reconsidering existing data sets from the recent literature and combining them with new experimental evidence, we show that uncertainty preferences can be driven by considerations regarding both the degree of complexity and ambiguity that a situation entails.

Key-words : Ambiguity, model uncertainty, complexity, Ellsberg paradox

JEL Classification : D81