Savage in the Market

Federico Echenique and Kota Saito

Econometrica, 2015, vol. 83, issue 4, 1467-1495

Abstract: We develop a behavioral axiomatic characterization of subjective expected utility (SEU) under risk aversion. Given is an individual agent's behavior in the market: assume a finite collection of asset purchases with corresponding prices. We show that such behavior satisfies a “revealed preference axiom” if and only if there exists a SEU model (a subjective probability over states and a concave utility function over money) that accounts for the given asset purchases.

Date: 2015
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