Revealed Preferences over Risk and Uncertainty
- (pp. 1782-1820)
AbstractWe develop a nonparametric method, called Generalized Restriction of Infinite Domains (GRID), for testing the consistency of budgetary choice data with models of choice under risk and under uncertainty. Our test can allow for risk-loving and elation-seeking attitudes, or it can 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 various models under risk (expected utility, disappointment aversion, rank-dependent utility, and stochastically monotone utility) using data collected from several recent portfolio choice experiments.
CitationPolisson, Matthew, John K.-H. Quah, and Ludovic Renou. 2020. "Revealed Preferences over Risk and Uncertainty." American Economic Review, 110 (6): 1782-1820. DOI: 10.1257/aer.20180210
- C14 Semiparametric and Nonparametric Methods: General
- D11 Consumer Economics: Theory
- D12 Consumer Economics: Empirical Analysis
- D81 Criteria for Decision-Making under Risk and Uncertainty