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Consistency, Heterogeneity, and Granularity of Individual Behavior under Uncertainty

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  • Syngjoo Choi
  • Raymond Fisman
  • Douglas Gale
  • Shachar Kariv

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.
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Suggested Citation

  • Syngjoo Choi & Raymond Fisman & Douglas Gale & Shachar Kariv, 2007. "Consistency, Heterogeneity, and Granularity of Individual Behavior under Uncertainty," Levine's Bibliography 321307000000000793, UCLA Department of Economics.
  • Handle: RePEc:cla:levrem:321307000000000793
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    References listed on IDEAS

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    More about this item

    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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