A Note on the Risk Behavior and Death of Homo Economicus

Abstract

Recent papers by Cox and Sadiraj (2006) and Rubinstein (2006) have pointed out that expected utility theory is more general than has sometimes been acknowledged, and can hence not be refuted as easily by means of experiments. While acknowledging this fact, this note nevertheless demonstrates that typical risk experimental results appear impossible to reconcile with conventional consumption theory, where people are time consistent and integrate all sources of income perfectly.

Keywords: The Rabin Critique, expected utility of income, expected utility of final wealth

JEL Classification: D81, D91