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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 201706, Discussion Paper Series, Department of Economics from Department of Economics, University of St. Andrews

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 behavior 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, and stochastically monotone utility) in the data collected by Choi, Fisman, Gale, and Kariv (2007), in terms of pass rates, power, and predictive success.

Keywords: expected utility; rank dependent utility; disappointment aversion; generalized axiom of revealed preference; first order stochastic dominance; Afriat efficiency; Bronars power; Selten predictive succe (search for similar items in EconPapers)
JEL-codes: C14 C60 D11 D12 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm and nep-upt
Date: 2017-04-29, Revised 2017-09-13
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Related works:
Working Paper: Revealed preferences over risk and uncertainty (2017) Downloads
Working Paper: Revealed preferences over risk and uncertainty (2015) Downloads
Working Paper: Revealed preferences over risk and uncertainty (2015) Downloads
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