Decision making under uncertainty and ambiguity

This paper presents and analyzes the results of two experiments including small decision problems. In the experiments, subjects are asked to choose one of two alternatives for a few thousand times. First experiment, where payoff structure is clearly told, is carried out to explore choice under uncertainty by examining whether expected utility theory holds or not. Second experiment, where subjects have no prior information as to payoff structure, is performed to explore search under uncertainty by investigating whether the ambiguity model holds or not. The results capture expected utility theory by setting extremely concave utility functions, while the ambiguity theory is supported.