Consistency and heterogeneity of individual behavior under uncertainty

Syngjoo Choi, Raymond Fisman, Douglas Gale, Shachar Kariv

    Research output: Contribution to journalArticle

    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.

    Original languageEnglish (US)
    Pages (from-to)1921-1938
    Number of pages18
    JournalAmerican Economic Review
    Volume97
    Issue number5
    DOIs
    StatePublished - Dec 2007

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    Uncertainty
    Individual behaviour
    Risk preferences
    Portfolio choice
    Utility function

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Consistency and heterogeneity of individual behavior under uncertainty. / Choi, Syngjoo; Fisman, Raymond; Gale, Douglas; Kariv, Shachar.

    In: American Economic Review, Vol. 97, No. 5, 12.2007, p. 1921-1938.

    Research output: Contribution to journalArticle

    Choi, Syngjoo ; Fisman, Raymond ; Gale, Douglas ; Kariv, Shachar. / Consistency and heterogeneity of individual behavior under uncertainty. In: American Economic Review. 2007 ; Vol. 97, No. 5. pp. 1921-1938.
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