American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Consistency and Heterogeneity of Individual Behavior under Uncertainty
American Economic Review
vol. 97,
no. 5, December 2007
(pp. 1921–1938)
Abstract
By using graphical representations of simple portfolio choice problems, we generate a very rich dataset to study behavior under uncertainty at the level of the individual subject. We test the data for consistency with the maximization hypothesis, and we estimate preferences using a two-parameter utility function based on Faruk Gul (1991). This specification provides a good interpretation of the data at the individual level and can account for the highly heterogeneous behaviors observed in the laboratory. The parameter estimates jointly describe attitudes toward risk and allow us to characterize the distribution of risk preferences in the population. (JEL D11, D14, D81, G11)Citation
Choi, Syngjoo, Raymond Fisman, Douglas Gale, and Shachar Kariv. 2007. "Consistency and Heterogeneity of Individual Behavior under Uncertainty." American Economic Review, 97 (5): 1921–1938. DOI: 10.1257/aer.97.5.1921Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D14 Household Saving; Personal Finance
- D81 Criteria for Decision-Making under Risk and Uncertainty
- G11 Portfolio Choice; Investment Decisions