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A Revealed Preference Test for Choquet and Max-Min Expected Utility with Ambiguity Aversion†

Author

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  • Thomas Demuynck
  • Clément Staner

Abstract

We develop a revealed preference test for the Choquet expected utility model with ambiguity aversion, which does not rely on specific functional form assumptions on the utility index. It is computationally efficient if the number of states is not too large, even for a large number of observations. This is a nice feature compared to other existing revealed preference tests for decision models with ambiguity. We illustrate the usefulness of our results by implementing our test on two experimental datasets from the literature, and we compare the empirical fit of this model to the subjective expected utility model. (JEL C91, D81, D91, G41)

Suggested Citation

  • Thomas Demuynck & Clément Staner, 2024. "A Revealed Preference Test for Choquet and Max-Min Expected Utility with Ambiguity Aversion†," ULB Institutional Repository 2013/390822, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/390822
    Note: SCOPUS: ar.j
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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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