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An experimental test of the Anscombe-Aumann Monotonicity axiom


Schneider, Florian; Schonger, Martin (2017). An experimental test of the Anscombe-Aumann Monotonicity axiom. Working paper series / Department of Economics 207, University of Zurich.

Abstract

Most models of ambiguity aversion satisfy Anscombe-Aumann’s Monotonicity axiom. Monotonicity imposes separability of preferences across events that occur with unknown probability. We construct a test of Monotonicity by modifying the Allais paradox to a setting with both subjective and objective uncertainty. Two experimental studies are conducted: while study 1 uses U.S. online workers and a natural source of ambiguity, study 2 employs European students and an Ellsberg urn. In both studies, modal behavior violates Monotonicity in a specific, intuitive way. Overall, our data suggest that violations of Monotonicity are as prevalent as violations of von Neumann-Morgenstern’s Independence axiom.

Abstract

Most models of ambiguity aversion satisfy Anscombe-Aumann’s Monotonicity axiom. Monotonicity imposes separability of preferences across events that occur with unknown probability. We construct a test of Monotonicity by modifying the Allais paradox to a setting with both subjective and objective uncertainty. Two experimental studies are conducted: while study 1 uses U.S. online workers and a natural source of ambiguity, study 2 employs European students and an Ellsberg urn. In both studies, modal behavior violates Monotonicity in a specific, intuitive way. Overall, our data suggest that violations of Monotonicity are as prevalent as violations of von Neumann-Morgenstern’s Independence axiom.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:D81
Uncontrolled Keywords:Ambiguity aversion, monotonicity, Anscombe-Aumann, Allais paradox, experiments
Language:English
Date:May 2017
Deposited On:14 Oct 2015 14:23
Last Modified:08 Dec 2017 14:24
Series Name:Working paper series / Department of Economics
Number of Pages:26
ISSN:1664-7041
Additional Information:Revised version ; Former title: Allais at the Horse Race: testing models of ambiguity aversion
Official URL:http://www.econ.uzh.ch/static/wp/econwp207.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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