Quasiconcave Preferences and Choices on a Probability Simplex – A Nonparametric Analysis

Jan Heufer

No 179, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: A nonparametric approach is presented to test whether decisions on a probability simplex could be induced by quasiconcave preferences. Necessary and sufficient conditions are presented. If the answer is affirmative, the methods developed here allow to reconstruct bounds on indifference curves. Furthermore we can construct quasiconcave utility functions in analogy to the utility function constructed in the proof of Afriat's Theorem. The approach is of interest for decisions under risk, stochastic choice, and ex-ante fairness considerations. The method is particularly suitable for data collected in a laboratory experiment.

Keywords: Afriat's theorem; deterministic preferences; decisions under risk; experimental economcics; nonparametric methods; revealed preference; stochastic choice (search for similar items in EconPapers)
JEL-codes: C14 C91 D11 D12 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:179

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