Hostname: page-component-f554764f5-sl7kg Total loading time: 0 Render date: 2025-04-23T00:56:46.068Z Has data issue: false hasContentIssue false
  • English
  • Français

Measuring natural source dependence

Published online by Cambridge University Press:  14 March 2025

Cédric Gutierrez  and
Emmanuel Kemel Open the ORCID record for Emmanuel Kemel [Opens in a new window]
Cédric Gutierrez*
Affiliation:
Department of Management and Technology and ICRIOS, Bocconi University, 20136 Milan, Italy
Emmanuel Kemel*
Affiliation:
GREGHEC, CNRS & HEC Paris, 78351 Jouy-en-Josas, France
*
[email protected]
[email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

The consequences of most economic decisions are uncertain; they are conditional on events with unknown probabilities that decision makers evaluate based on their beliefs. In addition to consequences and beliefs, the context that generates events—the source of uncertainty—can also impact preferences, a pattern called source dependence. Despite its importance, there is currently no definition of source dependence that allows for comparisons across individuals and sources. This paper presents a tractable definition of source dependence by introducing a function that matches the subjective probabilities of events generated by two sources. It also presents methods for estimating such functions from a limited number of observations that are compatible with commonly-used choice-based approaches for separating attitudes from beliefs. As an illustration, we implement these methods on three datasets, including two original experiments, and show that they consistently capture clear, albeit heterogeneous, patterns of source dependence between natural sources. Our approach provides a framework for future research to explore how source dependence varies across individuals and situations.

Keywords

Decision under uncertaintyAmbiguity aversionSources of uncertaintySubjective beliefsSource dependenceFamiliarity bias

JEL classification

C91: Laboratory, Individual Behavior D81: Criteria for Decision-Making under Risk and Uncertainty
Type
Original Paper
Information
Experimental Economics , Volume 27 , Issue 2 , April 2024 , pp. 379 - 416
Copyright
Copyright © The Author(s), under exclusive licence to Economic Science Association 2024. Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

Footnotes

The authors acknowledge financial support from the Investissements d’Avenir Labex Ecodec/ANR-11-LABX-0047 for making this research possible. Note: The replication material for the study is available at https://doi.org/10.3886/E195941V2.

References

Abdellaoui, M., Baillon, A., Placido, L., & Wakker, P. P. (2011). The rich domain of uncertainty: Source functions and their experimental implementation. American Economic Review, 101(2), 695–723. 10.1257/aer.101.2.695CrossRefGoogle Scholar
Abdellaoui, M., Bleichrodt, H., & Gutierrez, C. (2023). Unpacking overconfident behavior when betting on oneself. Management Science. (Forthcoming).Google Scholar
Abdellaoui, M., Bleichrodt, H., Kemel, E., & L’Haridon, O. (2021). Measuring beliefs under ambiguity. Operations Research, 69(2), 599–612. 10.1287/opre.2020.1980CrossRefGoogle Scholar
Abdellaoui, M., Kemel, E., Panin, A., & Vieider, F. M. (2019). Measuring time and risk preferences in an integrated framework. Games and Economic Behavior, 115, 459–469. 10.1016/j.geb.2019.03.001CrossRefGoogle Scholar
Anantanasuwong, K., Kouwenberg, R., Mitchell, O. S., & Peijnenberg, K. (2019). Ambiguity attitudes about investments: Evidence from the field. Working paper. National Bureau of Economic Research, Available at SSRN: https://ssrn.com/abstract=3336513.CrossRefGoogle Scholar
Armantier, O., & Treich, N. (2013). Eliciting beliefs: Proper scoring rules, incentives, stakes and hedging. European Economic Review, 62, 17–40. 10.1016/j.euroecorev.2013.03.008CrossRefGoogle Scholar
Attema, A. E., Bleichrodt, H., & L’Haridon, O. (2018). Ambiguity preferences for health. Health Economics, 27(11), 1699–1716. 10.1002/hec.3795CrossRefGoogle ScholarPubMed
Baillon, A. (2008). Eliciting subjective probabilities through exchangeable events: An advantage and a limitation. Decision Analysis, 5(2), 76–87. 10.1287/deca.1080.0113CrossRefGoogle Scholar
Baillon, A., & Bleichrodt, H. (2015). Testing ambiguity models through the measurement of probabilities for gains and losses. American Economic Journal: Microeconomics, 7(2), 77–100.Google Scholar
Baillon, A., Bleichrodt, H., Keskin, U., L’Haridon, O., & Li, C. (2017). The effect of learning on ambiguity attitudes. Management Science, 64(5), 2181–2198. 10.1287/mnsc.2016.2700CrossRefGoogle Scholar
Baillon, A., Bleichrodt, H., Li, C., & Wakker, P. P. (2021). Belief hedges: Measuring ambiguity for all events and all models. Journal of Economic Theory, 198. 10.1016/j.jet.2021.105353CrossRefGoogle Scholar
Baillon, A., Bleichrodt, H., Li, C., & Wakker, P. P. (2023). Source theory: A tractable and positive ambiguity theory. Working Paper.Google Scholar
Baillon, A., Bleichrodt, H., & Spinu, V. (2020). Searching for the reference point. Management Science, 66(1), 93–112. 10.1287/mnsc.2018.3224CrossRefGoogle Scholar
Baillon, A., Huang, Z., Selim, A., & Wakker, P. P. (2018). Measuring ambiguity attitudes for all (natural) events. Econometrica, 86(5), 1839–1858. 10.3982/ECTA14370CrossRefGoogle Scholar
Barham, B. L., Chavas, J-P, Fitz, D., Salas, V. R., & Schechter, L. (2014). The roles of risk and ambiguity in technology adoption. Journal of Economic Behavior & Organization, 97, 204–218. 10.1016/j.jebo.2013.06.014CrossRefGoogle Scholar
Berger, L., Bleichrodt, H., & Eeckhoudt, L. (2013). Treatment decisions under ambiguity. Journal of Health Economics, 32(3), 559–569. 10.1016/j.jhealeco.2013.02.001CrossRefGoogle ScholarPubMed
Bohnet, I., & Zeckhauser, R. (2004). Trust, risk and betrayal. Journal of Economic Behavior & Organization, 55(4), 467–484. 10.1016/j.jebo.2003.11.004CrossRefGoogle Scholar
Bouchouicha, R., Martinsson, P., Medhin, H., & Vieider, F. M. (2017). Stake effects on ambiguity attitudes for gains and losses. Theory and Decision, 83(1), 19–35. 10.1007/s11238-016-9585-5CrossRefGoogle Scholar
Bruhin, A., Fehr-Duda, H., & Epper, T. (2010). Risk and rationality: Uncovering heterogeneity in probability distortion. Econometrica, 78(4), 1375–1412. 10.3982/ECTA7139Google Scholar
Bruttel, L., Bulutay, M., Cornand, C., Heinemann, F., & Zylbersztejn, A. (2022). Measuring strategic-uncertainty attitudes. Experimental Economics, 26, 1–28.Google Scholar
Cabantous, L. (2007). Ambiguity aversion in the field of insurance: Insurers’ attitude to imprecise and conflicting probability estimates. Theory and Decision, 62(3), 219–240. 10.1007/s11238-006-9015-1CrossRefGoogle Scholar
Calford, E. M. (2020). Uncertainty aversion in game theory: Experimental evidence. Journal of Economic Behavior & Organization, 176, 720–734. 10.1016/j.jebo.2020.06.011CrossRefGoogle Scholar
Chark, R., & Chew, S. H. (2015). A neuroimaging study of preference for strategic uncertainty. Journal of Risk and Uncertainty, 50, 209–227. 10.1007/s11166-015-9220-9CrossRefGoogle Scholar
Chew, S. H., Ebstein, R. P., & Zhong, S. (2012). Ambiguity aversion and familiarity bias: Evidence from behavioral and gene association studies. Journal of Risk and Uncertainty, 44(1), 1–18. 10.1007/s11166-011-9134-0CrossRefGoogle Scholar
Croitoru, B., & Lu, L. (2014). Asset pricing in a monetary economy with heterogeneous beliefs. Management Science, 61(9), 2203–2219. 10.1287/mnsc.2014.1968CrossRefGoogle Scholar
Cutler, D. M., Finkelstein, A., & McGarry, K. (2008). Preference heterogeneity and insurance markets: Explaining a puzzle of insurance. American Economic Review, 98(2), 157–62 10.1257/aer.98.2.157CrossRefGoogle ScholarPubMed
de Lara Resende, J. G., & Wu, G. (2010). Competence effects for choices involving gains and losses. Journal of Risk and Uncertainty, 40(2), 109–132. 10.1007/s11166-010-9089-6CrossRefGoogle Scholar
DeJarnette, P., Dillenberger, D., Gottlieb, D., & Ortoleva, P. (2020). Time lotteries and stochastic impatience. Econometrica, 88(2), 619–656. 10.3982/ECTA16427CrossRefGoogle Scholar
Di Mauro, C., & Finocchiaro Castro, M. (2011). Kindness, confusion, or... ambiguity?. Experimental Economics, 14, 611–633. 10.1007/s10683-011-9284-6CrossRefGoogle Scholar
Dimmock, S. G., Kouwenberg, R., Mitchell, O. S., & Peijnenburg, K. (2016). Ambiguity aversion and household portfolio choice puzzles: Empirical evidence. Journal of Financial Economics, 119(3), 559–577. 10.1016/j.jfineco.2016.01.003CrossRefGoogle ScholarPubMed
Dimmock, S. G., Kouwenberg, R., & Wakker, P. P. (2016). Ambiguity attitudes in a large representative sample. Management Science, 62(5), 1363–1380. 10.1287/mnsc.2015.2198CrossRefGoogle Scholar
Easley, D., & O’Hara, M. (2009). Ambiguity and nonparticipation: The role of regulation. The Review of Financial Studies, 22(5), 1817–1843. 10.1093/rfs/hhn100CrossRefGoogle Scholar
Eichberger, J., & Kelsey, D. (2011). Are the treasures of game theory ambiguous?. Economic Theory, 48(2–3), 313–339. 10.1007/s00199-011-0636-4CrossRefGoogle Scholar
Eichberger, J., Kelsey, D., & Schipper, B. C. (2008). Granny versus game theorist: Ambiguity in experimental games. Theory and Decision, 64(2–3), 333 10.1007/s11238-007-9053-3CrossRefGoogle Scholar
Ellsberg, D. (1961). Risk, ambiguity, and the savage axioms. The Quarterly Journal of Economics, 75(4), 643–669. 10.2307/1884324CrossRefGoogle Scholar
Falk, A., Becker, A., Dohmen, T., Enke, B., Huffman, D., & Sunde, U. (2018). Global evidence on economic preferences. The Quarterly Journal of Economics, 133(4), 1645–1692. 10.1093/qje/qjy013CrossRefGoogle Scholar
Fox, C. R., & Tversky, A. (1995). Ambiguity aversion and comparative ignorance. The Quarterly Journal of Economics, 110(3), 585–603. 10.2307/2946693CrossRefGoogle Scholar
Fox, C. R., & Ülkümen, G. (2011). Distinguishing two dimensions of uncertainty. In Brun, , Keren, G., Kirkebøen, G. Montgomery, H. (Eds.), Perspectives on thinking, judging, and decision making (pp. 21–35). Oslo, Norway: Universitetsforlaget.Google Scholar
Fox, C. R., & Weber, M. (2002). Ambiguity aversion, comparative ignorance, and decision context. Organizational Behavior and Human Decision Processes, 88(1), 476–498. 10.1006/obhd.2001.2990CrossRefGoogle Scholar
Gaudecker, H-M, Van Soest, A., & Wengstrom, E. (2011). Heterogeneity in risky choice behavior in a broad population. American Economic Review, 101(2), 664–94 10.1257/aer.101.2.664Google Scholar
Gaudecker, H.-M., Wogrolly, A., & Zimpelmann, C. (2022). The distribution of ambiguity attitudes. Working Paper.CrossRefGoogle Scholar
Goldstein, W. M., & Einhorn, H. J. (1987). Expression theory and the preference reversal phenomena. Psychological Review, 94(2), 236 10.1037/0033-295X.94.2.236CrossRefGoogle Scholar
Heath, C., & Tversky, A. (1991). Preference and belief: Ambiguity and competence in choice under uncertainty. Journal of Risk and Uncertainty, 4(1), 5–28. 10.1007/BF00057884CrossRefGoogle Scholar
Hoy, M., Peter, R., & Richter, A. (2014). Take-up for genetic tests and ambiguity. Journal of Risk and Uncertainty, 48, 111–133. 10.1007/s11166-014-9186-zCrossRefGoogle Scholar
Ivanov, A. (2011). Attitudes to ambiguity in one-shot normal-form games: An experimental study. Games and Economic Behavior, 71(2), 366–394. 10.1016/j.geb.2010.05.009CrossRefGoogle Scholar
Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. 10.2307/1914185CrossRefGoogle Scholar
Kelsey, D., & Le Roux, S. (2015). An experimental study on the effect of ambiguity in a coordination game. Theory and Decision, 79, 667–688. 10.1007/s11238-015-9483-2CrossRefGoogle Scholar
Kelsey, D., & Le Roux, S. (2017). Dragon slaying with ambiguity: Theory and experiments. Journal of Public Economic Theory, 19(1), 178–197. 10.1111/jpet.12185CrossRefGoogle Scholar
Kilka, M., & Weber, M. (2001). What determines the shape of the probability weighting function under uncertainty?. Management Science, 47(12), 1712–1726. 10.1287/mnsc.47.12.1712.10239CrossRefGoogle Scholar
Klibanoff, P., Marinacci, M., & Mukerji, S. (2005). A smooth model of decision making under ambiguity. Econometrica, 73(6), 1849–1892. 10.1111/j.1468-0262.2005.00640.xCrossRefGoogle Scholar
Kreps, D. M., & Porteus, E. L. (1978). Temporal resolution of uncertainty and dynamic choice theory. Econometrica, 46(1), 185–200. 10.2307/1913656CrossRefGoogle Scholar
Lau, S. T., Ng, L., & Zhang, B. (2010). The world price of home bias. Journal of Financial Economics, 97(2), 191–217. 10.1016/j.jfineco.2010.04.002CrossRefGoogle Scholar
L’Haridon, O., & Vieider, F. M. (2019). All over the map: A worldwide comparison of risk preferences. Quantitative Economics, 10(1), 185–215. 10.3982/QE898CrossRefGoogle Scholar
Li, C. (2017). Are the poor worse at dealing with ambiguity?. Journal of Risk and Uncertainty, 54(3), 239–268. 10.1007/s11166-017-9262-2CrossRefGoogle Scholar
Li, C., Turmunkh, U., & Wakker, P. P. (2019). Trust as a decision under ambiguity. Experimental Economics, 22(1), 51–75. 10.1007/s10683-018-9582-3CrossRefGoogle Scholar
Li, C., Turmunkh, U., & Wakker, P. P. (2020). Social and strategic ambiguity versus betrayal aversion. Games and Economic Behavior, 123, 272–287. 10.1016/j.geb.2020.07.007CrossRefGoogle Scholar
Li, Z., Müller, J., Wakker, P. P., & Wang, T. V. (2017). The rich domain of ambiguity explored. Management Science, 64(7), 3227–3240. 10.1287/mnsc.2017.2777CrossRefGoogle Scholar
Millner, A., Dietz, S., & Heal, G. (2013). Scientific ambiguity and climate policy. Environmental & Resource Economics, 55(1), 21 10.1007/s10640-012-9612-0CrossRefGoogle Scholar
Murphy, R. O., & ten Brincke, R. H. (2017). Hierarchical maximum likelihood parameter estimation for cumulative prospect theory: Improving the reliability of individual risk parameter estimates. Management Science, 64(1), 308–326. 10.1287/mnsc.2016.2591CrossRefGoogle Scholar
Muthukrishnan, A., Wathieu, L., & Xu, A. J. (2009). Ambiguity aversion and the preference for established brands. Management Science, 55(12), 1933–1941. 10.1287/mnsc.1090.1087CrossRefGoogle Scholar
Prelec, D. (1998). The probability weighting function. Econometrica, 66(3), 497–527. 10.2307/2998573CrossRefGoogle Scholar
Pulford, B. D., & Colman, A. M. (2007). Ambiguous games: Evidence for strategic ambiguity aversion. Quarterly Journal of Experimental Psychology, 60(8), 1083–1100. 10.1080/17470210600866354CrossRefGoogle ScholarPubMed
Savage, L. J. (1954). The foundations of statistics, DoverPress.Google Scholar
Train, K. E. (2009). Discrete choice methods with simulation, Cambridge University Press.Google Scholar
Trautmann, S. T., & van de Kuilen, G. (2015). Ambiguity attitudes. The Wiley Blackwell handbook of judgment and decision making, 1, 89–116. 10.1002/9781118468333.ch3CrossRefGoogle Scholar
Tversky, A., & Fox, C. R. (1995). Weighing risk and uncertainty. Psychological Review, 102(2), 269 10.1037/0033-295X.102.2.269CrossRefGoogle Scholar
van de Kuilen, G., & Wakker, P. P. (2011). The midweight method to measure attitudes toward risk and ambiguity. Management Science, 57(3), 582–598. 10.1287/mnsc.1100.1282CrossRefGoogle Scholar
Viscusi, W. K., & Zeckhauser, R. J. (2015). Regulating ambiguous risks: The less than rational regulation of pharmaceuticals. The Journal of Legal Studies, 44(S2), S387–S422. 10.1086/684305CrossRefGoogle Scholar
Wakker, P. P. (2004). On the composition of risk preference and belief. Psychological Review, 111(1), 236 10.1037/0033-295X.111.1.236CrossRefGoogle Scholar
Supplementary material: File

Gutierrez and Kemel supplementary material

Measuring natural source dependence (Online Appendix)
Download Gutierrez and Kemel supplementary material(File)
File 10.9 MB