Intertemporal Consumption with Risk: A Revealed Preference Analysis

Lanier, Joshua and Miao, Bin and Quah, John and Zhong, Songfa (2018): Intertemporal Consumption with Risk: A Revealed Preference Analysis.

Abstract

We run an experiment designed to elicit preferences over state contingent, timed payouts. We analyze the data using a new revealed preference method (building on Nishimura, Ok, and Quah (2017)) that can test for consistency with utility functions that increase with a given preorder. Using this approach, we find strong evidence of correlation averse behavior, a property ruled out by discounted expected utility. We also find evidence in favor of stochastic impatience.

• Item Type: MPRA Paper
• Language: English
• Keywords: risk preference, time preference, revealed preference, budgetary choice, Afriat's Theorem, experiment
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles; D - Microeconomics > D9 - Intertemporal Choice > D90 - General

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