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Revealed Preferences over Risk and Uncertainty

Matthew Polisson, John Quah and Ludovic Renou

American Economic Review, 2020, vol. 110, issue 6, 1782-1820

Abstract: We develop a nonparametric method, called Generalized Restriction of Infinite Domains (GRID), for testing the consistency of budgetary choice data with models of choice under risk and under uncertainty. Our test can allow for risk-loving and elation-seeking attitudes, or it can require risk aversion. It can also be used to calculate, via Afriat's efficiency index, the magnitude of violations from a particular model. We evaluate the performance of various models under risk (expected utility, disappointment aversion, rank-dependent utility, and stochastically monotone utility) using data collected from several recent portfolio choice experiments.

JEL-codes: C14 D11 D12 D81 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Revealed preferences over risk and uncertainty (2017) Downloads
Working Paper: Revealed preferences over risk and uncertainty (2015) Downloads
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DOI: 10.1257/aer.20180210

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