Imprecise Datasets as a Source for Ambiguity A Model and Experimental Evidence

In our model an individual forms beliefs over events based on the frequencies of occurrences of the events in past cases. However, in some cases, he might not know whether or not a speci\u85c event has occurred. Our model suggests that ambiguity may arise due to this sort of partial information and that attitude towards ambiguity can be explained by the way the individual process such im-precise cases. An individual who tends to put low weight on the possibility that an event occurred in these imprecise cases will turn out to be ambiguity averse, whereas an individual who tends to put high weight on the possibility that this event occurred will turn out to be ambiguity loving. The model is followed by an experiment designed to test the main features of the model. It is corroborated that given precise data subjects are ambiguity neutral while given imprecise data subjects are ambiguity averse. We wish to thank Anat Bracha, Itzhak Gilboa, Dotan Persitz, Ariel Rubinstein, Ella Segev, Peter Wakker and participant of the PhD seminar at Tel Aviv University for many helpful comments and suggestions