Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222094
Authors: 
Echenique, Federico
Imai, Taisuke
Saito, Kota
Year of Publication: 
2019
Series/Report no.: 
Discussion Paper No. 197
Abstract: 
We design and implement a novel experimental test of subjective expected utility theory and its generalizations. Our experiments are implemented in the laboratory with a student population, and pushed out through a large-scale panel to a general sample of the US population. We find that a majority of subjects' choices are consistent with maximization of some utility function, but not with subjective utility theory. The theory is tested by gauging how subjects respond to price changes. A majority of subjects respond to price changes in the direction predicted by the theory, but not to a degree that makes them fully consistent with subjective expected utility. Surprisingly, maxmin expected utility adds no explanatory power to subjective expected utility. Our findings remain the same regardless of whether we look at laboratory data or the panel survey, even though the two subject populations are very different. The degree of violations of subjective expected utility theory is not affected by age nor cognitive ability, but it is correlated with financial literacy.
Subjects: 
uncertainty
subjective expected utility
maxmin expected utility
revealed preference
JEL: 
D01
D81
D90
Document Type: 
Working Paper

Files in This Item:
File
Size
2.28 MB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.