Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2014-04-01
Number: 14-044/I
Author-Name: Aurélien Baillon
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Philipp Koellinger
Author-Workplace-Name: University of Amsterdam
Author-Name: Theresa Treffers
Author-Workplace-Name: Technical University Eindhoven
Title: Sadder but wiser: The Effects of Affective States and Weather on Ambiguity Attitudes
Abstract: Many important decisions are made without precise information about the probabilities of the outcomes. In such situations, individual ambiguity attitudes influence decision making. The present study identifies affective states as a transient cause of ambiguity attitudes. We conducted two random-assignment, incentive-compatible laboratory experiments, varying subjects’ affective states. We find that sadness induces choices that are closer to ambiguity-neutral attitudes compared with the joy, fear, and control groups, where decision makers deviate more from payoff-maximizing behaviors and are more susceptible to likelihood insensitivity. We also find a similar pattern in a representative population sample where cloudy weather conditions on the day of the survey - a proxy for sad affect - correlate with more ambiguity-neutral attitudes. Our results may help explain re al-world phenomena such as financial markets that react to regular fluctuations in weather conditions.
Classification-JEL: D03, D81
Keywords: Ambiguity attitude, affect, joy, fear, sadness, weather, experiment.
File-Url: https://papers.tinbergen.nl/14044.pdf
File-Format: application/pdf
File-Size: 379863 bytes
Handle: RePEc:tin:wpaper:20140044