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In the experiments, the ambiguous environment is operationalized by an urn. Subjects participating in the experiments are told that the urn contains in total 100 balls, and that each ball is either a white ball or a black ball. However, neither the number of white balls nor the number of black balls is known to any subject. No information is conveyed to any subject regarding how the urn is assembled. A binary lottery, whose outcome is either winning or losing, is designed based on this urn. Subjects are told that the payoff of the lottery is determined by a random draw from the urn: in case that a white ball is drawn out, the lottery pays out a positive financial reward (i.e. 3.75 Euro); in case that a black ball is drawn out, the lottery pays out zero. Therefore, an ambiguous lottery (built on the ambiguous urn) is set up. This design also implies that neither the winning probability nor the losing probability of the lottery is known to any subject. In total, seven sessions are conducted, with 102 participants altogether. The subjects are all randomly selected from the subject pool of the Frankfurt Laboratory for Experimental Economic Research (FLEX), Goethe University Frankfurt. Most subjects are students from Goethe University Frankfurt with various studying backgrounds, without previous experience in economicsrelated experiments.
ambiguity, belief estimation, belief effect, ambiguity premium, laboratory experiments
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