DP9461 Manipulating Reliance on Intuition Reduces Risk and Ambiguity Aversion.

Author(s): Jeff Butler, Luigi Guiso, Tullio Jappelli
Publication Date: May 2013
Keyword(s): ambiguity aversion, decision theory, dual systems, intuitive thinking, risk aversion
JEL(s): D81, D83
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9461

Prior research suggests that those who rely on intuition rather than effortful reasoning when making decisions are less averse to risk and ambiguity. The evidence is largely correlational, however, leaving open the question of the direction of causality. In this paper, we present experimental evidence of causation running from reliance on intuition to risk and ambiguity preferences. We directly manipulate participants? predilection to rely on intuition and find that enhancing reliance on intuition lowers the probability of being ambiguity averse by 30 percentage points and increases risk tolerance by about 30 percent in the experimental sub‐ population where we would a priori expect the manipulation to be successful (males).