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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 University of Leicester)

  • 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.

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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: Mar 2013
Date of revision:
Handle: RePEc:ifs:ifsewp:13/05
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  1. 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 256-75, March-Apr.
  2. Tomasz Strzalecki, 2011. "Axiomatic Foundations of Multiplier Preferences," Econometrica, Econometric Society, vol. 79(1), pages 47-73, 01.
  3. Wakker,Peter P., 2010. "Prospect Theory," Cambridge Books, Cambridge University Press, number 9780521765015.
  4. Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2004. "The Collective Model of Household Consumption : A Nonparametric Characterization," Discussion Paper 2004-76, Tilburg University, Center for Economic Research.
  5. Martin Browning & Laura Blow, 2006. "Revealed Preference Analysis of Characteristics Models," Economics Series Working Papers 282, University of Oxford, Department of Economics.
  6. repec:cup:cbooks:9780521748681 is not listed on IDEAS
  7. David Ahn & Syngjoo Choi & Douglas Gale & Shachar Kariv, 2008. "Estimating Ambiguity Aversion in a Portfolio Choice Experiment," Levine's Working Paper Archive 122247000000001989, David K. Levine.
  8. Forges, Françoise & Minelli, Enrico, 2009. "Afriat's theorem for general budget sets," Economics Papers from University Paris Dauphine 123456789/4099, Paris Dauphine University.
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