Year: 2020
Type: article
Abstract: We develop a nonparametric method, called Generalized Restriction of Infinite Domains (GRID), for testing the consistency of budgetary choice data with models of choice under risk and under uncertainty. Our test can allow for risk-loving and elation-seeking attitudes, or it can require risk aversion. It can also be used to calculate, via Afriat’s efficiency index, the magnitude of violations from a particular model. We evaluate the performance of various models under risk (expected utility, disappointment aversion, rank-dependent utility, and stochastically monotone utility) using data collected from several recent portfolio choice experiments. (JEL C14, D11, D12, D81)
Source: American Economic Review
DOI: 10.1257/aer.20180210
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
Funder: Agence Nationale de la Recherche
OpenAlex ID: W3123305453