Risk and ambiguous choices : individual versus groups, an experimental analysis

Purpose: This study examines individual ambiguity attitudes alone and in groups by leveraging the descriptive model of anchoring and adjustment on decision-making under ambiguity. The study extends Ellsberg's probability ambiguity to outcome ambiguity and examines decisions made under both ambiguities, at different likelihood levels and under the domain of gains and losses. Design/methodology/approach: The methodology selected for this study is a two-stage within-subject lab experiment, with participants from different Indian universities. Each participant made 12 lottery decisions at the individual level and at individuals in the group level. Findings: The results show that ambiguity attitudes are not universal in nature. Ambiguity seeking as a dominant choice was observed at both the individual level and at individual in the group level. However, the magnitude of ambiguity seeking or ambiguity aversion contingent upon the domain of gains and losses differed widely across the individual level and at individuals in the group level. Research limitations/implications: The study enables to contribute toward giving a robust descriptive explanation for individual behavior in real-world applications of finance. It aims to provide direction for theoretical normative models to accommodate heterogeneity of ambiguity attitudes. Originality/value: The study is novel as it examines a two-dimensional approach by representing ambiguity in probability and in outcomes. It also analyzes whether decisions under ambiguity vary when individuals make decisions alone and when they make it in groups.