An Experimental Test of a Search Model under Knightian Uncertainty

Abstract

This paper's objective is to design a laboratory experiment to explore the e¤ect of Knightian uncertainty on a subject's search behavior in a …nite sequential search model.Our …nding is that the average search duration is shorter when there is Knightian uncertainty in the sense that the true point distribution is unknown to subjects, compared to when the point distribution is known.We also …nd direct evidence that subjects reduce their own reservation point when there is ambiguity about the point distribution.These results support the implication of Nishimura and Ozaki (2004).Moreover, ambiguity notably a¤ects the search behavior of risk averse subjects, but not of either risk neutral or risk prone subjects.

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