Resolving the Ellsberg Paradox by Assuming that People Evaluate Repetitive Sampling

Schneeweiß, Hans (1999): Resolving the Ellsberg Paradox by Assuming that People Evaluate Repetitive Sampling. Collaborative Research Center 386, Discussion Paper 153

Abstract

Ellsberg (1961) designed a decision experiment where most people violated the axioms of rational choice. He asked people to bet on the outcome of certain random events with known and with unknown probabilities. They usually preferred to bet on events with known probabilities. It is shown that this behavior is reasonable and in accordance with the axioms of rational decision making if it is assumed that people consider bets on events that are repeatedly sampled instead of just sampled once.

• Item Type: Paper
• Keywords: Ellsberg's paradox, rational decision making, Sure Thing Principle, subjective probabilities
• Faculties: Mathematics, Computer Science and Statistics > Statistics > Collaborative Research Center 386; Special Research Fields > Special Research Field 386
• Subjects: 500 Science > 510 Mathematics
• Language: English