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Revealed preferences over risk and uncertainty

Matthew Polisson (), John Quah () and Ludovic Renou
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Ludovic Renou: Queen Mary University of London

No 822, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: We develop a nonparametric procedure, called the lattice method, for testing the consistency of contingent consumption data with a broad class of models of choice under risk and under uncertainty. Our method allows for risk loving and elation seeking behaviour and can be used to calculate, via Afriat’s efficiency index, the magnitude of violations from a particular model of choice. We evaluate the performance of different models (including expected utility, disappointment aversion, rank dependent utility, mean-variance utility, and stochastically monotone utility) in the data collected by Choi et al. (2007), in terms of pass rates, power, and predictive success.

Keywords: expected utility; rank dependent utility; disappointment aversion; Bronars power; predictive success; generalized axiom of revealed preference; first order stochastic dominance; mean-variance utility; Afriat’s efficiency index (search for similar items in EconPapers)
JEL-codes: C14 C60 D11 D12 D81 (search for similar items in EconPapers)
Date: 2017-04-26
New Economics Papers: this item is included in nep-dcm and nep-upt
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Related works:
Journal Article: Revealed Preferences over Risk and Uncertainty (2020) Downloads
Working Paper: Revealed preferences over risk and uncertainty (2015) Downloads
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