Asset Demand Based Tests of Expected Utility Maximization

Felix Kubler, Larry Selden and Xiao Wei

American Economic Review, 2014, vol. 104, issue 11, 3459-80

Abstract: We provide conditions under which contingent claim and asset demands are consistent with state independent Expected Utility maximization. The paper focuses on the case of a single commodity and demands are allowed to be functions of probabilities and not just prices and income. We extend prior analyses by deriving three distinct tests for demands to be rationalized by Expected Utility: (i) a contingent claim analogue to the certainty strong axiom of revealed preference, (ii) a characterization of the functional form for demand and (iii) necessary and sufficient conditions based on the Slutsky matrix.

JEL-codes: D01 D11 D81 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.11.3459
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Citations: View citations in EconPapers (19)

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