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Approximate Expected Utility Rationalization

Echenique, Federico and Imai, Taisuke and Saito, Kota (2018) Approximate Expected Utility Rationalization. Social Science Working Paper, 1441. California Institute of Technology , Pasadena, CA. (Unpublished)

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We propose a new measure of deviations from expected utility, given data on economic choices under risk and uncertainty. In a revealed preference setup, and given a positive number e, we provide a characterization of the datasets whose deviation (in beliefs, utility, or perceived prices) is within e of expected utility theory. The number e can then be used as a distance to the theory. We apply our methodology to three recent large-scale experiments. Many subjects in those experiments are consistent with utility aximization, but not expected utility maximization. The correlation of our measure with demographics is also interesting, and provides new and intuitive findings on expected utility.

Item Type:Report or Paper (Working Paper)
Related URLs:
URLURL TypeDescription ItemDiscussion Paper
Echenique, Federico0000-0002-1567-6770
Imai, Taisuke0000-0002-0610-8093
Saito, Kota0000-0003-1189-8912
Additional Information:We are very grateful to Nicola Persico, who posed questions to us that led to some of the results in this paper, and to Dan Friedman and Yves Le Yaouanq for very helpful comments on an early draft. This research is supported by Grant SES1558757 from the National Science Foundation. Echenique also thanks the NSF for its support through the grant CNS-1518941.
Group:Social Science Working Papers
Funding AgencyGrant Number
Series Name:Social Science Working Paper
Issue or Number:1441
Record Number:CaltechAUTHORS:20191018-101812371
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:99359
Deposited By: Katherine Johnson
Deposited On:18 Oct 2019 17:22
Last Modified:03 Mar 2021 21:28

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