Intertemporal Consumption With Risk: A Revealed Preference Analysis

51 Pages Posted: 10 May 2018 Last revised: 29 Jun 2020

See all articles by Joshua Lanier

Joshua Lanier

University of Oxford

Bin Miao

Shanghai University of Finance and Economics - School of Economics

John Kim-Ho Quah

University of Oxford - Department of Economics

Songfa Zhong

National University of Singapore (NUS) - Department of Economics

Date Written: June 11, 2020

Abstract

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

Lanier, Joshua and Miao, Bin and Quah, John Kim-Ho and Zhong, Songfa, Intertemporal Consumption With Risk: A Revealed Preference Analysis (June 11, 2020). Available at SSRN: https://ssrn.com/abstract=3168361 or http://dx.doi.org/10.2139/ssrn.3168361

Joshua Lanier

University of Oxford ( email )

South Parks Road
Oxford, OX1 3QZ
United Kingdom

Bin Miao

Shanghai University of Finance and Economics - School of Economics ( email )

777 Guoding Road
Shanghai, 200433
China

John Kim-Ho Quah

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Songfa Zhong (Contact Author)

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

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