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Consistency, Heterogeneity, and Granularity of Individual Behavior under Uncertainty

Author

Listed:
  • Syngjoo Choi

    () (Department of Economics, University College London)

  • Raymond Fisman

    () (Graduate School of Business, Columbia University)

  • Douglas Gale

    () (Department of Economics, New York University)

  • Shachar Kariv

    () (Department of Economics, University of California, Berkeley)

Abstract

By using graphical representations of budget sets over bundles of state-contingent commodities, we generate a very rich data set well-suited to studying 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 to the data at the level of the individual subject 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.

Suggested Citation

  • Syngjoo Choi & Raymond Fisman & Douglas Gale & Shachar Kariv, 2007. "Consistency, Heterogeneity, and Granularity of Individual Behavior under Uncertainty," Economics Working Papers 0076, Institute for Advanced Study, School of Social Science.
  • Handle: RePEc:ads:wpaper:0076
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    uncertainty; revealed preference; Expected Utility Theory; loss/disappointment aversion; experiment;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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