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Revealed preference analysis of expected utility maximization under prize-probability trade-offs

Cherchye, Laurens and Demuynck, Thomas and Rock, Bram De and Freer, Mikhail (2022) 'Revealed preference analysis of expected utility maximization under prize-probability trade-offs.' Journal of Mathematical Economics, 99. p. 102607. ISSN 0304-4068

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Abstract

We provide a revealed preference characterization of expected utility maximization in binary lotteries with prize-probability trade-offs. We start by characterizing optimizing behavior when the empirical analyst exactly knows the utility function or the probability function of winning. Next, we consider the situation with both the probability function and the utility function unknown. In this case utility maximization has empirical content when imposing the mild shape restriction that at least one of these functions is log-concave.

Item Type: Article
Uncontrolled Keywords: Expected utility maximization; Prize-probability trade-offs; Revealed preference characterization; Testable implications
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Economics, Department of
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 02 Dec 2021 13:49
Last Modified: 10 Mar 2022 11:02
URI: http://repository.essex.ac.uk/id/eprint/31797

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