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Ambiguity Aversion and Comparative Ignorance

Craig R. Fox and Amos Tversky
The Quarterly Journal of Economics
Vol. 110, No. 3 (Aug., 1995), pp. 585-603
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2946693
Page Count: 19
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Ambiguity Aversion and Comparative Ignorance
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Abstract

Decisions under uncertainty depend not only on the degree of uncertainty but also on its source, as illustrated by Ellsberg's observation of ambiguity aversion. In this article we propose the comparative ignorance hypothesis, according to which ambiguity aversion is produced by a comparison with less ambiguous events or with more knowledgeable individuals. This hypothesis is supported in a series of studies showing that ambiguity aversion, present in a comparative context in which a person evaluates both clear and vague prospects, seems to disappear in a noncomparative context in which a person evaluates only one of these prospects in isolation.

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