Ellsberg Paradox: Ambiguity and Complexity Aversions Compared


We present a simple model that can explain the Ellsberg paradox by  relying on complexity aversion preferences, rather than on belief formation or ambiguity aversion. We test our theory using laboratory experiments where subjects choose among lotteries that "range" from a simple risky lottery, through risky but more complex lotteries, to one similar to Ellsberg's ambiguity urn. Our model produces predictions in contrast, at least in flavor, to those generated by typical models of ambiguity. Since the results provide support to the notion of complexity aversion, we suggest that complexity aversion may be a complementary principle behind the failure to reduce compound lotteries and the non-neutral ambiguity attitudes frequently observed in experiments.

Información adicional

  • Presentador: Jaromir Kovarik
  • Proveniente: Universidad del País Vasco
  • Fecha: Martes, 14 Abril 2015
  • Hora: 12:50
  • Lugar: Sala de reuniones, Departamento de Economía