IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Identifying Preferences under Risk from Discrete Choices

  • Pierre-Andre Chiappori
  • Amit Gandhi
  • Bernard Salanie
  • Francois Salanie

When studying consumption choices, economists have often relied on the abstraction of a representative agent. Such an agent can indeed be shown to exist and to replicate the aggregate consumers' demand under standard, but not necessarily convincing assumptions (Kirman (1992)). There was also ajustifiable reluctance to introducing heterogeneous preferences, as such a step may seem ad hoc when trying to explain different consumption behaviors. The rise of empirical studies based on micro data has opened new perspectives. The micro-economic importance of uninsurable risks is now recognized, and threatens the foundations of the representative agent hypothesis often used in macroeconomics. The continuing controversies surrounding the question of individual attitudes towards risk has motivated many empirical studies and observations; most of them conclude to a bewildering diversity of individual preferences. This paper proposes to check the conditions under which heterogeneous individual attitudes toward risk can be non-parametrically identified from discrete data on choices under risk. Our main result establishes that given data that is usually available (essentially market shares of the different options, plus the realizations of the final outcomes of agents), the analyst can recover the whole distribution of individual preferences if this can be indexed by a one-dimensional parameter, provided that a fairly weak single-crossing condition holds. We then discuss several applications of our general methodology.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www2.toulouse.inra.fr/lerna/travaux/cahiers2009/09.11.287.pdf
Download Restriction: no

Paper provided by LERNA, University of Toulouse in its series LERNA Working Papers with number 09.11.287.

as
in new window

Length:
Date of creation: May 2009
Date of revision:
Handle: RePEc:ler:wpaper:09.11.287
Contact details of provider: Postal: manufacture des Tabacs, 21 allée de brienne, 31200 Toulouse
Phone: (+33) 5 61 12 86 23
Web page: http://www.toulouse.inra.fr/lerna/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Viscusi, W Kip & Aldy, Joseph E, 2003. " The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
  2. Alma Cohen & Liran Einav, 2005. "Estimating Risk Preferences from Deductible Choice," Discussion Papers 04-031, Stanford Institute for Economic Policy Research.
  3. Rosen, Sherwin, 1988. " The Value of Changes in Life Expectancy," Journal of Risk and Uncertainty, Springer, vol. 1(3), pages 285-304, September.
  4. Pierre‐André Chiappori & Bruno Jullien & Bernard Salanié & François Salanié, 2006. "Asymmetric information in insurance: general testable implications," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 783-798, December.
  5. Syngjoo Choi & Raymond Fisman & Douglas Gale & Shachar Kariv, 2007. "Consistency and Heterogeneity of Individual Behavior under Uncertainty," American Economic Review, American Economic Association, vol. 97(5), pages 1921-1938, December.
  6. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
  7. repec:reg:rpubli:282 is not listed on IDEAS
  8. Bruno Jullien & Bernard Salanié & François Salanié, 2007. "Screening risk-averse agents under moral hazard: single-crossing and the CARA case," Economic Theory, Springer, vol. 30(1), pages 151-169, January.
  9. Bruno Jullien & Bernard Salanie, 2000. "Estimating Preferences under Risk: The Case of Racetrack Bettors," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 503-530, June.
  10. repec:rje:randje:v:37:y:2006:i:4:p:783-798 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ler:wpaper:09.11.287. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maxime MARTY)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.