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Ambiguity revealed

Author Info

Listed author(s):
  • Ralph Bayer

    (Institute for Fiscal Studies)

  • Subir Bose

    (Institute for Fiscal Studies)

  • Matthew Polisson

    ()

    (Institute for Fiscal Studies)

  • Ludovic Renou

    (Institute for Fiscal Studies)

Abstract

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.

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File URL: http://www.ifs.org.uk/wps/wp1305.pdf
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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W13/05.

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Date of creation: 28 Mar 2013
Handle: RePEc:ifs:ifsewp:13/05
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Keywords: ambiguity; expected utility; maxmin; revealed preference; smooth; uncertainty; variational;

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Find related papers by JEL classification:
  • D1 - Microeconomics - - Household Behavior
  • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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  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, 01.
  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. Wakker,Peter P., 2010. "Prospect Theory," Cambridge Books, Cambridge University Press, number 9780521765015.
  5. 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.
  6. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," Review of Economic Studies, Oxford University Press, vol. 25(2), pages 65-86.
  7. 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, 07.
  8. 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, 03.
  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.

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