A Non Parametric Test of the Expected Utility Hypothesis

A nonparametric test of the expected utility hypothesis is developed. It is shown that the expected utility hypothesis holds if there exists a feasible solution to a system of linear inequalities. Furthermore, when a feasible solution exists boundaries on the coefficient of absolute risk aversion can be calculated explicitly. The test is applied to data on land allocations that are modeled as choices over lottery sets. The result is that the expected utility hypothesis cannot be rejected in most of the cases. This result is in contrast to results obtained in many laboratory experiments.


Issue Date:
1990
Publication Type:
Working or Discussion Paper
Record Identifier:
http://ageconsearch.umn.edu/record/232671
PURL Identifier:
http://purl.umn.edu/232671
Total Pages:
33
Series Statement:
Working Paper
9005




 Record created 2017-04-01, last modified 2018-01-23

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