Abstract

There is much interest in ambiguity-averse behavior under uncertainty, and many theories have been advanced to explain this. Empirical analyses of choices involving ambiguous options have typically used a representative agent model. We address the question of whether representative agent models are accurate approximations of reality or whether there is substantial heterogeneity in ambiguity preferences. In contrast to the representative agent model, we find that the vast majority of participants are not significantly ambiguity averse and that a significant proportion of participants are consistent with expected utility theory. This finding has important implications for the application of behavioral economics.

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Supplementary data