Decision under ambiguity: Effects of sign and magnitude

TL;DR

This paper investigates how the sign and magnitude of outcomes influence ambiguity aversion and subjective probability additivity in decision-making under uncertainty, highlighting effects in both gains and losses.

Contribution

It provides new insights into how outcome sign and magnitude affect ambiguity attitudes and probability assessments, extending neuroeconomic research beyond gains.

Findings

Ambiguity aversion occurs in both gain and loss domains.

Subadditivity of subjective probability is absent in negative outcomes.

Outcome sign influences ambiguity-related decision behaviors.

Abstract

Decision under ambiguity (uncertainty with unknown probabilities) has been attracting attention in behavioral and neuroeconomics. However, recent neuroimaging studies have mainly focused on gain domains while little attention has been paid to the magnitudes of outcomes. In this study, we examined the effects of the sign (i.e. gain and loss) and magnitude of outcomes on ambiguity aversion and the additivity of subjective probabilities in Ellsberg's urn problem. We observed that (i) ambiguity aversion was observed in both signs, and (ii) subadditivity of subjective probability was not observed in negative outcomes.