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A test for risk-averse expected utility

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  • Chambers, Christopher P.
  • Liu, Ce
  • Martinez, Seung-Keun

Abstract

We provide a universal condition for rationalizability by risk-averse expected utility preference in a demand-based framework with multiple commodities. Our test can be viewed as a natural counterpart of a classical test of expected utility, due to Fishburn (1975), in a demand setting.

Suggested Citation

  • Chambers, Christopher P. & Liu, Ce & Martinez, Seung-Keun, 2016. "A test for risk-averse expected utility," Journal of Economic Theory, Elsevier, vol. 163(C), pages 775-785.
    • Handle: RePEc:eee:jetheo:v:163:y:2016:i:c:p:775-785
    DOI: 10.1016/j.jet.2016.03.002
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    References listed on IDEAS

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    1. Epstein, Larry G., 2000. "Are Probabilities Used in Markets ?," Journal of Economic Theory, Elsevier, vol. 91(1), pages 86-90, March.
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    7. Christopher P. Chambers & Federico Echenique & Eran Shmaya, 2014. "The Axiomatic Structure of Empirical Content," American Economic Review, American Economic Association, vol. 104(8), pages 2303-2319, August.
    8. Machina, Mark J & Schmeidler, David, 1992. "A More Robust Definition of Subjective Probability," Econometrica, Econometric Society, vol. 60(4), pages 745-780, July.
    9. Fishburn, Peter C., 1975. "Separation theorems and expected utilities," Journal of Economic Theory, Elsevier, vol. 11(1), pages 16-34, August.
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    Cited by:

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    2. Aluma Dembo & Shachar Kariv & Matthew Polisson & John K.-H. Quah, 2021. "Ever Since Allais," Bristol Economics Discussion Papers 21/745, School of Economics, University of Bristol, UK.
    3. Federico Echenique, 2020. "New Developments in Revealed Preference Theory: Decisions Under Risk, Uncertainty, and Intertemporal Choice," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 299-316, August.
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    5. Thomas Demuynck & Clément Staner, 2020. "An Efficient Revealed Preference Test for the Maxmin Expected Utility Model," Working Papers ECARES 2020-31, ULB -- Universite Libre de Bruxelles.

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    More about this item

    Keywords

    Expected utility; Revealed preference; Afriat inequalities;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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