PPE Research Group Explores Other-Regarding Preferences Under Ambiguity

Policymakers often have to make significant decisions regarding issues like health care and national security under severe uncertainty about how their decisions will affect specific members of society and society as a whole. This research project empirically investigates how individuals make ethical decisions under conditions of severe uncertainty, or ambiguity as it is sometimes called in economics. In the context of   policy-making, ambiguity refers to the situation in which decision-makers do not know the probabilities associated with potential policy outcomes.

This research project supported by the Kellogg Center for Philosophy, Politics, and Economics is conducted by Adam Dominiak and Sudipta Sarangi in Economics, and Michael Moehler and Thomas Rowe in Philosophy (although none of them is featured in the picture above from the 2017 PPE Distinguished Public Lecture). The project centers around a 287-participant experiment that was conducted at Virginia Tech. The experiment assesses how participants make decisions under conditions of risk and uncertainty both when the outcomes of the decisions affect their own potential payoffs, and when they affect the payoffs of other participants.

The results indicate that there is a tendency for participants to be averse to ambiguity when the potential payoff is either for themselves or for one other participant. The participants treat a decision on behalf of another person as if they were deciding for themselves. When deciding on behalf of multiple other participants, there is a tendency to select a more ambiguous alternative when the exposure to ambiguity is more evenly spread across participants, compared to an alternative that exposes some participants to more risk than others. The findings suggests that participants are sensitive to considerations of procedural fairness.

The project provides insights into a foundational questions of public policy, including to what extent a policymaker is, or ought to be, averse to risk and ambiguity when deciding on behalf of citizens.