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Ambiguity Revealed

Author

Listed:
  • Subir Bose

    ()

  • Matthew Polisson

    ()

  • Ludovic Renou

    ()

Abstract

We derive necessary and suffcient conditions for data sets composed of state-contingent prices and consumption to be consistent with two prominent models of decision making under ambiguity: variational preferences and smooth ambiguity. The revealed preference conditions for the maxmin expected utility and subjective expected utility models are characterized as special cases.

Suggested Citation

  • Subir Bose & Matthew Polisson & Ludovic Renou, 2012. "Ambiguity Revealed," Discussion Papers in Economics 12/07, Department of Economics, University of Leicester.
  • Handle: RePEc:lec:leecon:12/07
    as

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    File URL: http://www.le.ac.uk/economics/research/repec/lec/leecon/dp12-07.pdf
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    References listed on IDEAS

    as
    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. Wakker,Peter P., 2010. "Prospect Theory," Cambridge Books, Cambridge University Press, number 9780521765015, March.
    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, July.
    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, March.
    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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    Citations

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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

    Keywords

    Ambiguity; revealed preference; maxmin; variational preferences; expected utility; smooth; uncertainty;

    JEL classification:

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

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