Intertemporal Consumption With Risk: A Revealed Preference Analysis
51 Pages Posted: 10 May 2018 Last revised: 29 Jun 2020
Date Written: June 11, 2020
We run an experiment designed to elicit preferences over state contingent, timed payouts. We analyze the data using a new revealed preference method (building on Nishimura, Ok, and Quah (2017)) that can test for consistency with utility functions that increase with a given preorder. Using this approach, we find strong evidence of correlation averse behavior, a property ruled out by discounted expected utility. We also find evidence in favor of stochastic impatience.
Keywords: Risk Preference, Time Preference, Revealed Preference, Budgetary Choice, Afriat’s Theorem, Experiment
JEL Classification: C91, D81
Suggested Citation: Suggested Citation