Welcome to the new version of CaltechAUTHORS. Login is currently restricted to library staff. If you notice any issues, please email coda@library.caltech.edu
Published July 2015 | Published + Supplemental Material
Journal Article Open

Savage in the Market

Abstract

We develop a behavioral axiomatic characterization of subjective expected utility (SEU) under risk aversion. Given is an individual agent's behavior in the market: assume a finite collection of asset purchases with corresponding prices. We show that such behavior satisfies a "revealed preference axiom" if and only if there exists a SEU model (a subjective probability over states and a concave utility function over money) that accounts for the given asset purchases.

Additional Information

© 2015 The Econometric Society. Manuscript received February, 2014; final revision received January, 2015. We thank Kim Border and Chris Chambers for inspiration, comments, and advice. Matt Jackson's suggestions led to some of the applications of our main result.We also thank seminar audiences in Bocconi University, Caltech, Collegio Carlo Alberto, Princeton University, RUD 2014 (Warwick), University of Queensland, University of Melbourne, Larry Epstein, Eddie Dekel, Mark Machina, Massimo Marinacci, Fabio Maccheroni, John Quah, Ludovic Renou, Kyoungwon Seo, and Peter Wakker for comments. We are particularly grateful to the editor and three anonymous referees for their suggestions. The discussion of state-dependent utility and probabilistic sophistication in Sections 4 and 5 follow closely the suggestions of one particular referee.

Attached Files

Published - Echenique_et_al-2015-Econometrica.pdf

Supplemental Material - ecta1526-sup-0001-Supplement.pdf

Files

ecta1526-sup-0001-Supplement.pdf
Files (461.3 kB)
Name Size Download all
md5:70da30f652d6d87e6d68885b4742464d
179.7 kB Preview Download
md5:1a2079ff7ea8b2c2428535ca253771e0
281.6 kB Preview Download

Additional details

Created:
August 20, 2023
Modified:
October 23, 2023