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 201706, Discussion Paper Series, School of Economics and Finance from School of Economics and Finance, University of St Andrews
We develop a nonparametric procedure, called the lattice method, for testing the consistency of budgetary choice data with a broad class of models of choice under risk and under uncertainty. Our method can allow for risk loving and elation seeking attitudes, or it can be adapted to 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 different models under risk (including expected utility, disappointment aversion, rank dependent utility, and stochastically monotone utility) in the data collected from several recent portfolio choice experiments.
Keywords: expected utility; rank dependent utility; disappointment aversion; generalized axiom of revealed preference; first order stochastic dominance; risk aversion; Afriat efficiency; intertemporal choice (search for similar items in EconPapers)
JEL-codes: C14 C60 D11 D12 D81 (search for similar items in EconPapers)
Date: 2017-04-29, Revised 2019-04-16
New Economics Papers: this item is included in nep-dcm and nep-upt
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Journal Article: Revealed Preferences over Risk and Uncertainty (2020)
Working Paper: Revealed preferences over risk and uncertainty (2017)
Working Paper: Revealed preferences over risk and uncertainty (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:san:wpecon:1706
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