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Revealed preferences over risk and uncertainty

Research output: Working paperDiscussion paper

Author(s)

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

School/Research organisations

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, 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.
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Details

Original languageEnglish
Place of PublicationSt Andrews
PublisherUniversity of St Andrews
Number of pages59
Publication statusPublished - 13 Sep 2017

Publication series

NameSchool of Economics and Finance Discussion Paper
PublisherUniversity of St Andrews
No.1706
ISSN (Print)0962-4031
ISSN (Electronic)2055-303X

    Research areas

  • 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

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ID: 249911472