Advancement to Candidacy Presentation: “Ambiguity and Growing Awareness”, Sonal Barve

Speaker

Sonal Barve, PhD Student, University of California, Santa Barbara

Biography

Sonal is a PhD student in Economics at the University of California, Santa Barbara. Her research explores experimental and applied methods to study individual behavior under imperfect knowledge, uncertainty, and cognitive information processing constraints, and how these impact the effectiveness of institutions and social welfare.

Sonal holds a Bachelor's in Electronics and Communication Engineering from PICT, University of Pune, and a Master’s in Environmental Economics from Madras School of Economics, India, where she researched climate change and weather impacts on Indian farmers and the agriculture sector. Prior to her PhD, she also worked at the Reserve Bank of India, Mumbai, focusing on banking and credit culture research. In her spare time, she enjoys reading and discussing history, and watching documentaries.

Event Details

Sonal will be presenting her Advancement to Candidacy paper, “Ambiguity and Growing Awareness”. To access the Advancement paper, you must have an active UCSB NetID and password.

Abstract and JEL Codes

We provide evidence that behaviour under ambiguous bets is marked not only by a lack of precise probabilities about the outcomes of the bets but is also driven by subjects' past exposure to unawareness and their evolution of awareness about the space of outcomes on which the bets are defined. Controlling the specification of the partition of the full event space, we define two ambiguous bets, one on each partition element, which are objectively equally risky. We observe that differently specified partition elements give rise to different kinds of sources of uncertainty for subjects who experienced a growth in their awareness. This is revealed through a significant difference in their ambiguity preferences across the two choice environments. Such a difference is not found for our control treatment subjects who possess static and complete awareness. Finally, we resolve uncertainty completely and elicit subjects’ choices under a risky environment by providing information on precise objective probabilities. While all subjects become more risk seeking, we find that the information provision affects subjects with growth in awareness to a significantly greater degree. We discuss some potential mechanisms in the light of recent evidence on growing awareness. Overall, these findings suggest that the exposure to unawareness may have different implications for individual behaviour under the standard forms of uncertainty, namely, ambiguity and risk, that are not found for the uncertainty preferences of traditionally fully aware agents.

JEL Code: D83, D01, D81, D91