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Ambiguity revealed


  • Ralph Bayer

    (Institute for Fiscal Studies)

  • Subir Bose

    (Institute for Fiscal Studies)

  • Matthew Polisson

    () (Institute for Fiscal Studies and St Andrews University)

  • Ludovic Renou

    (Institute for Fiscal Studies)


We derive necessary and sufficient conditions for data sets composed of state-contingent prices and consumption to be consistent with two prominent models of decision making under uncertainty: variational preferences and smooth ambiguity. The revealed preference conditions for subjective expected utility, maxmin expected utility, and multiplier preferences are characterised as special cases. We implement our tests on data from a portfolio choice experiment.

Suggested Citation

  • Ralph Bayer & Subir Bose & Matthew Polisson & Ludovic Renou, 2013. "Ambiguity revealed," IFS Working Papers W13/05, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:13/05

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    References listed on IDEAS

    1. Laura Blow & Martin Browning & Ian Crawford, 2008. "Revealed Preference Analysis of Characteristics Models," Review of Economic Studies, Oxford University Press, vol. 75(2), pages 371-389.
    2. Tomasz Strzalecki, 2011. "Axiomatic Foundations of Multiplier Preferences," Econometrica, Econometric Society, vol. 79(1), pages 47-73, January.
    3. Forges, Françoise & Minelli, Enrico, 2009. "Afriat's theorem for general budget sets," Journal of Economic Theory, Elsevier, vol. 144(1), pages 135-145, January.
    4. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," Review of Economic Studies, Oxford University Press, vol. 25(2), pages 65-86.
    5. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A Nonparametric Characterization," Econometrica, Econometric Society, vol. 75(2), pages 553-574, March.
    6. Wakker,Peter P., 2010. "Prospect Theory," Cambridge Books, Cambridge University Press, number 9780521765015, March.
    7. Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 256-275, March-Apr.
    8. David Ahn & Syngjoo Choi & Douglas Gale & Shachar Kariv, 2014. "Estimating ambiguity aversion in a portfolio choice experiment," Quantitative Economics, Econometric Society, vol. 5, pages 195-223, July.
    9. W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 419-425.
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    Cited by:

    1. Polisson, Matthew & Renou, Ludovic, 2016. "Afriat’s Theorem and Samuelson’s ‘Eternal Darkness’," Journal of Mathematical Economics, Elsevier, vol. 65(C), pages 36-40.
    2. Matthew Polisson & John K.-H. Quah, 2013. "Revealed preference tests under risk and uncertainty," Discussion Papers in Economics 13/24, Department of Economics, University of Leicester.

    More about this item


    ambiguity; expected utility; maxmin; revealed preference; smooth; uncertainty; variational;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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