ESRC Centre for Economic Learning and Social Evolution
Abstract
By using graphical representations of simple portfolio choice problems,
we generate a very rich data set to study behavior under uncertainty
at the level of the individual subject. We test the data for
consistency with the maximization hypothesis, and we estimate preferences
using a two-parameter utility function based on Faruk Gul
(1991). This specification provides a good interpretation of the data
at the individual level and can account for the highly heterogeneous
behaviors observed in the laboratory. The parameter estimates jointly
describe attitudes toward risk and allow us to characterize the distribution
of risk preferences in the population
