Parametric Recovery Methods: A Comparative Experimental Study

Yoram Halevy and Lanny Zrill

Microeconomics.ca working papers from Vancouver School of Economics

Abstract: We propose and implement an experimental methodology for comparing the predictive success of various methods for recovering individual preferences from choice data. We apply the proposed approach to a comparison of two parametric recovery methods: Non Linear Least Squares (NLLS) and the Money Metric Index (MMI). The former is based on minimizing the distance between observed and predicted choices while the latter is based on eliminating incompatibility between the ranking information encoded in choices and the ranking induced by the parametric specification. The experiment, in the context of choice under risk, involves a two-part design where choices made by subjects in the first part are used to construct their choice sets in the second part of the experiment in order to separate the predictions of the two recovery methods. We find that the Money Metric Index predicts better than NLLS in all cases and significantly better when the recovered parameters imply non-convex preferences.

Keywords: Revealed Preference; Recoverability; Identification; Non-Convex Preferences; Pairwise Choice; First-Order Risk Aversion; Portfolio Choice; Laboratory (search for similar items in EconPapers)
JEL-codes: C18 C91 D81 G11 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2016-01-09, Revised 2016-11-03
New Economics Papers: this item is included in nep-dcm and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://faculty.arts.ubc.ca/yhalevy/MMI_NLLS.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ubc:pmicro:yoram_halevy-2016-2

Access Statistics for this paper

More papers in Microeconomics.ca working papers from Vancouver School of Economics
Bibliographic data for series maintained by Maureen Chin ().