Revealed Heterogeneity in Risk Preference
28 Pages Posted: 16 Nov 2021 Last revised: 17 Nov 2021
Date Written: November 15, 2021
We propose a nonparametric revealed preference test to identify heterogeneity in risk preference. Our method is simple and applicable to choice environments with revealed preference features. We further develop two measures of preference heterogeneity at both the individual and group levels, and apply them to examine the experimental data of Choi et al. (2014), whereby subjects in a representative sample make portfolio choices under budget constraints. We find that preference heterogeneity is linked to individual rationality, and males exhibit greater heterogeneity than females. Our study supports revealed preference analysis as a powerful tool in understanding economic behavior beyond individual rationality.
Keywords: revealed preference analysis; heterogeneity; risk preference; experiment
JEL Classification: C91, D81
Suggested Citation: Suggested Citation