Social and Strategic Ambiguity versus Betrayal Aversion

This paper examines the difference between strategic ambiguity, as in game theory, versus ambiguity as arising in individual decisions. We identify a new, non-strategic, component underlying all strategic ambiguities, called social ambiguity. We recommend correcting for it so as to better identify strategic causes. Thus, we shed new light on Bohnet and Zeckhauser’s betrayal aversion in the trust game. We first show theoretically that, contrary to preceding claims in the literature, ambiguity attitudes can play a role here. We then show experimentally that social ambiguity, rather than betrayal aversion, can explain the empirical findings. Using our new control, we are able to identify the unique effect of strategic ambiguity on decisions.Strategic complexity increases ambiguity perception, thus increasing people’s likelihood insensitivity when making decisions under strategic ambiguity. These results show the usefulness of controlling for ambiguity attitudes before speculating on strategic factors.