Pricing risk and ambiguity: The effect of perspective taking

Trautmann, S. T. and Schmidt, Ulrich (2012) Pricing risk and ambiguity: The effect of perspective taking Quarterly Journal of Experimental Psychology, 65 (1). pp. 195-205.

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Abstract

In the valuation of uncertain prospects, a difference is often observed between selling and buying perspectives. This paper distinguishes between risk (known probabilities) and ambiguity (unknown probabilities) in decisions under uncertainty and shows that the valuation disparity increases under ambiguity compared to risk. It is found that both the comparative versus noncomparative evaluation of risky and ambiguous prospects and the uniqueness of the valuation perspective (either seller or buyer) moderate this increase in the disparity under ambiguity. The finding is consistent with recent theoretical accounts of pricing under uncertainty. We discuss implications for market behaviour and for the ambiguity paradigm as a research tool.

Document Type: Article
Additional Information: Tilburg Univ, Dept Social Psychol, NL-5000 LE Tilburg, Netherlands. Tilburg Univ, Dept Econ, NL-5000 LE Tilburg, Netherlands. Univ Kiel, Kiel, Germany. Kiel Inst World Econ, Kiel, Germany. Trautmann, ST (reprint author), Tilburg Univ, Dept Social Psychol, POB 90153, NL-5000 LE Tilburg, Netherlands. s.t.trautmann@uvt.nl
Keywords: Uncertainty Ambiguity Risk Decision making willingness-to-accept comparative ignorance judges point aversion uncertainty wtp independence violations psychology preference
Research affiliation: Kiel University
OceanRep > The Future Ocean - Cluster of Excellence
Refereed: Yes
ISSN: 1747-0218
Projects: Future Ocean
Date Deposited: 14 May 2014 09:16
Last Modified: 01 Mar 2018 11:04
URI: http://eprints.uni-kiel.de/id/eprint/24274

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