ABSTRACT. In economic decisions we often have to deal with uncertain events for which no probabilities are known. Several normative models have been proposed for such decisions. Empirical studies have usually been qualitative, or they estimated ambiguity aversion through one single number. This paper introduces the source method, a tractable method for quantitatively analyzing uncertainty empirically that can capture the richness of ambiguity attitudes. The theoretical key in our method is the distinction between different sources of uncertainty, within which subjective (choice-based) probabilities can still be defined. Source functions convert those subjective probabilities into willingness to bet. We apply our method in an experiment, where we do not commit to particular ambiguity attitudes but let the data speak.

Economic sciences, Economie, Economie en bedrijfskunde, Knightian uncertainty, Maatschappelijke structuren en relaties, ambiguity aversion, belief measurement, home bias, nonexpected utility, probabilistic sophistication, source of uncertainty, subjective probability
Laboratory, Individual Behavior (jel C91), Criteria for Decision-Making under Risk and Uncertainty (jel D81)
hdl.handle.net/1765/21460
The American Economic Review
Accepted Manuscript, with Web Appendix (32 pages)
Erasmus Research Institute of Management

Abdellaoui, M, Baillon, A, Placido, L, & Wakker, P.P. (2010). Web-Appendix of: The Rich Domain of Uncertainty: Source Functions and Their Experimental Implementation. The American Economic Review, 1–39. Retrieved from http://hdl.handle.net/1765/21460