Unexpected Utility: Experimental Tests of Five Key Questions about Preferences over Risk
| dc.contributor.author | Andreoni, James | |
| dc.contributor.author | Harbaugh, William | |
| dc.date.accessioned | 2011-02-28T23:16:45Z | |
| dc.date.available | 2011-02-28T23:16:45Z | |
| dc.date.issued | 2009-12 | |
| dc.description | 28 p. | en_US |
| dc.description.abstract | Experimental work on preferences over risk has typically considered choices over a small number of discrete options, some of which involve no risk. Such experiments often demonstrate contradictions of standard expected utility theory. We reconsider this literature with a new preference elicitation device that allows a continuous choice space over only risky options. Our analysis assumes only that preferences depend on the probability p and prize x; U = u(p; x): We then allow subjects to choose p and x continuously on a linear budget constraint, r1p + r2x = m, so that all prospects with a nonzero expected value are risky. We test five of the most importantly debated questions about risk preferences: rationality, prospect theory asymmetry, the independence axiom, probability weighting, and constant relative risk aversion. Overall, we find that the expected utility model does unexpectedly well. | en_US |
| dc.identifier.uri | https://hdl.handle.net/1794/11000 | |
| dc.language.iso | en_US | en_US |
| dc.publisher | University of Oregon, Dept of Economics | en_US |
| dc.relation.ispartofseries | University of Oregon Economics Department Working Papers;2010-14 | |
| dc.title | Unexpected Utility: Experimental Tests of Five Key Questions about Preferences over Risk | en_US |
| dc.type | Working Paper | en_US |