Revealed Preferences over Risk and Uncertainty

Matthew Polisson, John K.-H. Quah, Ludovic Renou

Research output: Contribution to journalArticle (Academic Journal)peer-review

168 Downloads (Pure)

Abstract

We 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.
Original languageEnglish
Pages (from-to)1782-1820
Number of pages39
JournalAmerican Economic Review
Volume110
Issue number6
DOIs
Publication statusPublished - 1 Jun 2020

Structured keywords

  • ECON Microeconomic Theory

Keywords

  • Expected Utility
  • Rank Dependent Utility
  • Disappointment Aversion
  • Generalized Axiom of Revealed Preference
  • First Order Stochastic Dominance
  • Risk Aversion
  • Afriat Efficiency
  • Intertemporal Consumption

Fingerprint Dive into the research topics of 'Revealed Preferences over Risk and Uncertainty'. Together they form a unique fingerprint.

Cite this