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A Non Parametric Test of the Expected Utility Hypothesis

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  • Bar-Shira, Ziv

Abstract

A nonparametric test of the expected utility hypothesis is developed. It is shown that the expected utility hypothesis holds if there exists a feasible solution to a system of linear inequalities. Furthermore, when a feasible solution exists boundaries on the coefficient of absolute risk aversion can be calculated explicitly. The test is applied to data on land allocations that are modeled as choices over lottery sets. The result is that the expected utility hypothesis cannot be rejected in most of the cases. This result is in contrast to results obtained in many laboratory experiments.

Suggested Citation

  • Bar-Shira, Ziv, 1990. "A Non Parametric Test of the Expected Utility Hypothesis," Working Papers 232671, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
  • Handle: RePEc:ags:huaewp:232671
    DOI: 10.22004/ag.econ.232671
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    File URL: http://ageconsearch.umn.edu/record/232671/files/hebrewuniv-workingpapers-9005.pdf
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