Do sets of beliefs dilate when information is ambiguous?
PDF Apr 2020
With common models of updating under ambiguity, new information may increase the amount of relevant ambiguity: the set of priors may 'dilate.' We test experimentally one sharp case: agents bet on a risky urn and get information that is truthful or not based on the draw from an Ellsberg urn. Under typical models, the set of priors should dilate; ambiguity averse agents should lower their value of bets; ambiguity seeking should increase it. Instead, we find that ambiguity averse agents do not change it; ambiguity seeking ones increase it substantially. We also test bets on ambiguous urns and find sizable reactions to ambiguous information.