How Do Individuals Form Beliefs About and Evaluate Multi-Layer Prospects under Risk and Ambiguity

This project is jointly funded by the Economics program and the Established Program to Stimulate Competitive Research (EPSCoR). The research team investigates how individuals (i) process information when they are confronted with prospects characterized by multiple layers of risk and/or ambiguity and (ii) evaluate and make choices over such prospects. As an example of a multi-layered uncertain prospect, consider change where the translation of greenhouse gas emissions into regional or global climatic effects and the subsequent adverse climate effects are uncertain; or a public health emergency, where the likelihood of a future pandemic and its subsequent adverse effects on health outcomes are uncertain. This research project will outline a series of laboratory and survey experiments designed to elicit key behavioral parameters to inform development of theories of choice under multi-layer uncertainty. This project will develop novel methods for eliciting preferences and beliefs in situations characterized by multi-layer uncertainty. This will advance methodologies to elicit preferences over policy alternatives to address climate hazards or prevent the next pandemic and uncover factors that shape our perceptions of and attitudes towards compound and reduced form representations of multi-layer ambiguous prospects. Our experiments are designed to (i) elicit behavioral parameters to help develop models of decision-making under multi-layer uncertainty; and (ii) test existing models of choice under multi-layer risk and the formation of beliefs when facing multi-layer uncertainty, across gain and losses domains. The results will inform policy makers and local community leaders and enhance resilience towards uncertain events such as environmental change or future pandemics. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.