115 research outputs found
Testable Implications of Quasi-Hyperbolic and Exponential Time Discounting
We present the first revealed-preference characterizations of the models of exponential time discounting, quasi-hyperbolic time discounting, and other time-separable models of consumers’ intertemporal decisions. The characterizations provide non-parametric revealed-preference tests, which we take to data using the results of a recent experiment conducted by Andreoni and Sprenger (2012). For such data, we find that less than half the subjects are consistent with exponential discounting, and only a few more are consistent with quasi-hyperbolic discounting
Approximate Expected Utility Rationalization
We propose a new measure of deviations from expected utility, given data on economic choices under risk and uncertainty. In a revealed preference setup, and given a positive number e, we provide a characterization of the datasets whose deviation (in beliefs, utility, or perceived prices) is within e of expected utility theory. The number e can then be used as a distance to the theory. We apply our methodology to three recent large-scale experiments. Many subjects in those experiments are consistent with utility maximization, but not expected utility maximization. The correlation of our measure with demographics is also interesting, and provides new and intuitive findings on expected utility
Decision Making under Uncertainty: An Experimental Study in Market Settings
We design and implement a novel experimental test of subjective expected
utility theory and its generalizations. Our experiments are implemented in the
laboratory with a student population and pushed out through a large-scale panel
to a general sample of the U.S.\ population. We find that a majority of
subjects' choices are consistent with the maximization of {\em some} utility
function, but not with subjective utility theory. The theory is tested by
gauging how subjects respond to price changes. A majority of subjects respond
to price changes in the direction predicted by the theory, but not to a degree
that makes them fully consistent with subjective expected utility.
Surprisingly, maxmin expected utility adds no explanatory power to subjective
expected utility.
Our findings remain the same regardless of whether we look at laboratory data
or the panel survey, even though the two subject populations are very
different. The degree of violations of subjective expected utility theory is
not affected by age nor cognitive ability, but it is correlated with financial
literacy
Testable Implications of Models of Intertemporal Choice: Exponential Discounting and Its Generalizations
We present revealed-preference characterizations of the most common models of intertemporal choice: the model of exponentially discounted concave utility, and some of its generalizations. Our characterizations take consumption data as primitives, and provide nonparametric revealed-preference tests. We apply our tests to data from two recent experiments and find that our axiomatization delivers new insights and perspectives on datasets that had been analyzed by traditional parametric methods
Approximate Expected Utility Rationalization
We propose a new measure of deviations from expected utility, given data on economic choices under risk and uncertainty. In a revealed preference setup, and given a positive number e, we provide a characterization of the datasets whose deviation (in beliefs, utility, or perceived prices) is within e of expected utility theory. The number e can then be used as a distance to the theory.
We apply our methodology to three recent large-scale experiments. Many subjects in those experiments are consistent with utility aximization, but not expected utility maximization. The correlation of our measure with demographics is also interesting, and provides new and intuitive findings on expected utility
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