Ellsberg Paradox Analysis

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In 1961 Daniel Ellsberg developed the Ellsberg paradox. The Ellsberg paradox shows us that people choose to bet on known chances rather than unknown ones. Ellsberg provided this as evidence for “ambiguity aversion,” a general preference for taking known chances over unknown ones. In his experiment, Ellsberg used the following choice problem:
There are two urns each containing black and red balls. Urn 1 has 100 balls and the amount of black balls and red balls is unknown. Urn 2 has 50 black and 50 red balls. By guessing the correct color of a ball that’s randomly drawn from Urn 1 you can win $100. So would you choose black, red, or have no preference? If the drawing was made from Urn 2, would your answer change? Next imagine that if a red ball
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However, when using fault trees people usually think too little of the chance that the main cause of a problem could be some unmentioned alternative and because of this, fault trees can often time lead to biased judgments. It’s very hard to make people conscious of these omissions. Studies on omission neglect have shown that sensitivity to omissions can be regulated by the timing of judgment, information processing goals, specific identification of omitted attributes, and “comparative (vs. singular) judgment contexts” (Silvera, Kardes, Harvey, Cronley, & Houghton, 2005). The research in this journal contributes to growing research that’s shown that omission neglect plays an large role in “many different types of judgments across many different paradigms” such as: the pioneering brand advantage (Kardes & Gurumurthy, 1992), fault trees, selective hypothesis testing (Sanbonmatsu et al., 1998), the multiattribute evaluation (Sanbonmatsu et al., 1992; Sanbonmatsu, Kardes, et al., 1997), the feature-positive effect (Newman et al., 1980), and the Ellsberg paradox (Fox & Weber, 2002). In all of these circumstances, people focus too much on the information they have or happen to come across and don’t thoroughly accommodate or adapt their evaluations to the constraints that could apply to the evidence that’s in …show more content…
Each group was “randomly assigned to one of two conditions: criteria consideration vs. no criteria consideration” (Kardes, Posavac, Silvera, Cronley, Sanbonmatsu, Schertzer, Miller, Herr, Chandrashekaran, 2006). All participants were given a description of a car to read. In all the descriptions, the car (referred to as “Model A”) was described with three varying positive, highly favorable features and said to be under $12,000. Half of the participants were told to think about what features are most important to take into account when assessing an automobile before reading the description about Model A. Then they were asked to rank nine automobile features (the nine making up the descriptions used in the experiment) in order of their importance and give a brief explanation for their rankings. After reading the description of Model A, all the participants evaluated the car (on a 9 point scale), weighed the amount of information given (on a 10 point scale), and recorded their confidence in their overall judgment (on a 9 point scale). The “criteria consideration” groups’ evaluations of Model A were much less extreme and held with much less confidence than the evaluations of the “no criteria consideration” groups. And those who were asked to consider their “evaluative criteria” first didn’t think of the information given to be as adequate as the participants who didn’t first think about their “evaluative

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