Stake effects on ambiguity attitudes for gains and losses

Peer Reviewed
1 January 2016

This paper tests the effect of stake size on ambiguity attitudes. Compared to a baseline condition, the paper find subjects to be more ambiguity seeking for small probability gains and large-probability losses under high stakes. They are also more ambiguity averse for large-probability gains and small-probability losses. the study traces these effects back to stake effects on decisions under risk (known probabilities) and uncertainty (unknown probabilities). For risk the paper replicates previous findings. For uncertainty, it finds an increase in probabilistic insensitivity under high stakes that is driven by increased uncertainty aversion for large-probability gains and for small-probability losses.

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Publication | 15 December 2016