Causes of ambiguity aversion: Known versus unknown preferences

Abstract

Ambiguity aversion appears to have subtle psychological causes. Curley, Yates, and Abrams found that the fear of negative evaluation by others (FNE) increases ambiguity aversion. This paper introduces a design in which preferences can be private information of individuals, so that FNE can be avoided entirely. Thus, we can completely control for FNE and other social factors, and can determine exactly to what extent ambiguity aversion is driven by such social factors. In our experiment ambiguity aversion, while appearing as commonly found in the presence of FNE, disappears entirely if FNE is eliminated. Implications are discussed.