The Effects Of Framing Of Options And Regulatory Focus On Ambiguity Aversion

Decision makers prefer events with precise probabilities to ones with ambiguous probabilities, which is called ambiguity aversion. Although the predominant propensity for ambiguity aversion has been well established, there are still some shortcomings. At first, researchers haven’t reached an agreement on how domains of gain and loss affect ambiguity aversion. Secondly, few studies have explored whether positive and negative frames influence ambiguity aversion. Finally, as there is a close relationship between frames and regulatory focus, it is a better way to explore how they both influence ambiguity aversion. Therefore, we design two experiments to investigate the effects of domains or frames and regulatory focus on ambiguity aversion.In experiment 1, with 75 subjects from one college, 2(both domains: gains,losses) were carried out to explore how both domains influence ambiguity aversion under pairwise choices and certainty equivalents task.In experiment 2, with another 86 subjects from the same college, 2(regulatory focus: promotion focus, prevention focus) × 2(frames of options: positive frames,negative frames) were carried out to investigate how frames of options and regulatory focus influence ambiguity aversion in an interactive way.Based on the exist studies, we proposed the following hypotheses:Hypothesis 1: In pairwise choices task, subjects in a gain group would avoid ambiguous options, while subjects in a loss group were less likely to avoid ambiguous ones. In certainty equivalents task, whether in gains or losses domain, ambiguity aversion disappeared.Hypothesis 2: Whether probabilities are framed positively or negatively,promotion-focused subjects were neutral to ambiguity. When probabilities are framed positively, prevention-focused were more likely to prefer the risky option to the ambiguous option. The results reversed in a negative frame. Moreover, compared with prevention-focused individuals, promotion-focused people are more likely to prefer the ambiguous option to the risky option in a positive situation. However, in a negative situation, they both choose the former one, rather than the latter one.After the analysis of results, we found that:(1) In pairwise choices task, subjects in a gain group avoided ambiguous options,and subjects in a loss group were more likely to avoid ambiguous ones. In certainty equivalents task, the gain group is similar to the one in pairwise choices task, while in losses domain, ambiguity aversion disappeared.(2) Whether probabilities are framed positively or negatively, promotion-focused subjects were neutral to ambiguity. So were prevention-focused subjects. Furthermore,compared with promotion-focused individuals, prevention-focused subjects are more likely to prefer the risky option to the ambiguous option in a positive situation.However, in a negative situation, they both choose the latter one, rather than the former one.These results showed that(1) The impact of domains on ambiguity aversion was not the same under different tasks.(2) The impact of regulatory focus on ambiguity aversion was moderated by frames of options.