Approximate Expected Utility Rationalization

Federico Echenique, Taisuke Imai and Kota Saito

No 7348, CESifo Working Paper Series from CESifo

Abstract: We propose a new measure of deviations from expected utility, given data on economic choices under risk and uncertainty. In a revealed preference setup, and given a positive number e, we provide a characterization of the datasets whose deviation (in beliefs, utility, or perceived prices) is within e of expected utility theory. The number e can then be used as a distance to the theory. We apply our methodology to three recent large-scale experiments. Many subjects in those experiments are consistent with utility maximization, but not expected utility maximization. The correlation of our measure with demographics is also interesting, and provides new and intuitive findings on expected utility.

Keywords: expected utility; revealed preferences (search for similar items in EconPapers)
JEL-codes: D01 D81 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Approximate Expected Utility Rationalization (2023)
Working Paper: Approximate Expected Utility Rationalization (2023)
Working Paper: Approximate Expected Utility Rationalization (2021)
Working Paper: Approximate Expected Utility Rationalization (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7348

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