Ambiguous Forever? Preferences for Ex-ante and Ex-post Probability Information. 

Abstract

After a decision under ambiguity or compound risk, the probabilities associated with the resolution of the final outcome may remain unknown forever or be revealed either before (ex-ante) or after (ex-post) the resolution. Using an integrated discrete-choice experiment, this paper investigates preferences for ex-ante and ex-post information about probabilities under ambiguity and compound risk, in addition to attitudes toward uncertainty in both domains. Our results reveal model-free behavioral patterns and also support an econometric implementation of source theory, capturing preferences along two key dimensions: elevation and likelihood sensitivity. We find demand for both ex-ante and ex-post information that is likelihood-independent and highly correlated both within and across domains, suggesting the presence of a stable behavioral trait. Moreover, the information premium is positively correlated with ambiguity attitudes, but not with compound risk attitudes. These findings offer new insights into the relationship between ambiguity aversion, compound risk aversion, and the demand for information. Joint paper with Sarat Chandra Akella (Paris School of Economics).