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A Non Parametric Test of the Expected Utility Hypothesis

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  • Bar-Shira, Ziv

Abstract

A nonparametric test of the expected utility hypothesis is developed. It is shown that the expected utility hypothesis holds if there exists a feasible solution to a system of linear inequalities. Furthermore, when a feasible solution exists boundaries on the coefficient of absolute risk aversion can be calculated explicitly. The test is applied to data on land allocations that are modeled as choices over lottery sets. The result is that the expected utility hypothesis cannot be rejected in most of the cases. This result is in contrast to results obtained in many laboratory experiments.

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  • Bar-Shira, Ziv, 1990. "A Non Parametric Test of the Expected Utility Hypothesis," Working Papers 232671, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    • Handle: RePEc:ags:huaewp:232671
    DOI: 10.22004/ag.econ.232671
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    Cited by:

    1. Abler, David G., 1992. "Issues In Pesticide Policy: Discussion," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 21(2), pages 1-3, October.
    2. Z. Bar‐Shira & R.E. Just & D. Zilberman, 1997. "Estimation of farmers' risk attitude: an econometric approach," Agricultural Economics, International Association of Agricultural Economists, vol. 17(2-3), pages 211-222, December.
    3. Bard, Sharon K. & Barry, Peter J., 2001. "Assessing Farmers' Attitudes Toward Risk Using The "Closing-In" Method," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(1), pages 1-13, July.
    4. Nelson, Carl H. & Ndjeunga, Jupiter, 1997. "Elliptical Symmetry, Expected Utility, And Mean-Variance Analysis," ACE Reports 14795, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    5. McDonald, Jeffrey D. & Moffitt, L. Joe & Willis, Cleve E., 1997. "Application of mean-Gini stochastic efficiency analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 41(1), pages 1-18.
    6. Pannell, David J. & Malcolm, Bill & Kingwell, Ross S., 1995. "Are We Risking Too Much? Perspectives on Risk in Farm Modelling and Farm Management," 1995 Conference (39th), February 14-16, 1995, Perth, Australia 171063, Australian Agricultural and Resource Economics Society.
    7. Hanna L. Breetz & Karen Fisher-Vanden & Hannah Jacobs & Claire Schary, 2005. "Trust and Communication: Mechanisms for Increasing Farmers’ Participation in Water Quality Trading," Land Economics, University of Wisconsin Press, vol. 81(2).
    8. Richard Horan & James Shortle & David Abler, 2002. "Ambient Taxes Under m-Dimensional Choice Sets, Heterogeneous Expectations, and Risk-Aversion," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(2), pages 189-202, February.
    9. Timothy K. M. Beatty & Ian A. Crawford, 2011. "How Demanding Is the Revealed Preference Approach to Demand?," American Economic Review, American Economic Association, vol. 101(6), pages 2782-2795, October.
    10. Finkelshtain, Israel & Feinerman, Eli, 1997. "Framing the Allais paradox as a daily farm decision problem: tests and explanations," Agricultural Economics, Blackwell, vol. 15(3), pages 155-167, January.
    11. Tsur, Yacov & Zemel, Amos, 1998. "Pollution control in an uncertain environment," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 967-975, June.
    12. van Mellor, Thuy & Alexander, Corinne E. & Bledsoe, Larry & Krupke, Christian, 2006. "An Economic Analysis of Control of the Western Corn Rootworm Variant across Indiana," 2006 Annual meeting, July 23-26, Long Beach, CA 21264, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Pannell, David J. & Malcolm, Bill & Kingwell, Ross S., 2000. "Are we risking too much? Perspectives on risk in farm modelling," Agricultural Economics, Blackwell, vol. 23(1), pages 69-78, June.

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