Testing the expected utility maximization hypothesis with limited experimental data |
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Affiliation: | 1. Erasmus School of Economics and Tinbergen Institute, Erasmus University, Rotterdam DR 3000, The Netherlands;2. Research Institute of Industrial Economics, Box 5565, Stockholm SE-102 15, Sweden |
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Abstract: | In this article we use some old ideas of Franklin to derive the partial differential equation (St Robert Equation) characterizing the level curves of expected utility maximizing preferences over simple gambles. We also provide conditions under which an incomplete family of level curves permits an investigator to determine whether or not the subject maximizes expected utility and if so under what conditions preferences can be recovered uniquely. |
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