Abstrakt
I investigate the relationship between attitudes towards ambiguity and ability to reduce compound risks. The evidence from an experiment on adolescents shows that patterns identified in the previous literature are susceptible to experimental design and subject sample characteristics.
Overall for a 20% of my subject sample, I do not observe a significant relationship between ambiguity-neutral behavior and reduction of compound lotteries. The relationship also varies with subjects' cognitive skills and the way lotteries are presented.
My results caution about theoretical studies which model ambiguity preferences by relaxing the assumption of compound risk reduction, and add to the evidence against the use of compound lotteries to represent ambiguity in experiments.