We develop a nonparametric procedure, called the lattice method, for testing the consistency of contingent consumption data with a broad class of models of choice under risk and under uncertainty. Our method allows for risk loving and elation seeking behavior and can be used to calculate, via...

This paper studies when stochastic choices are consistent with behavior from Bayesian expected utility maximization and information acquisition. This is a limited dataset since other characterization require state-dependent stochastic choice data. The conditions that characterize this behavior...

Consider a finite data set where each observation consists of a bundle of contingent consumption chosen by an agent from a constraint set of such bundles. We develop a general procedure for testing the consistency of this data set with a broad class of models of choice under risk and under...

It is often easier to identify agents’ preferences for action, holding probabilities fixed, than to delineate all the possible consequences of actions. Under what conditions can such preferences be formulated as if agents maximize expected utility? As Green and Osband (1991) noted,...

For choice with deterministic consequences, the standard rationality hypothesis is ordinality, i.e., maximization of a weak preference ordering. For choice under risk (resp. uncertainty), preferences are assumed to be represented by the objectively (resp. subjectively) expected value of a von...