Journal article
Stronger utility
Theory and Decision, Vol.76(2), pp.265-286
2014
Abstract
Empirical research often requires a method how to convert a deterministic economic theory into an econometric model. A popular method is to add a random error term on the utility scale. This method, however, ignores stochastic dominance. A modification of this method is proposed to account for stochastic dominance. The modified model compares favorably to other existing models in terms of goodness of fit to experimental data. The modified model can rationalize the preference reversal phenomenon. An intuitive axiomatic characterization of the modified model is provided. Important microeconomic concept of risk aversion is well defined in the modified model.
Details
- Title
- Stronger utility
- Authors/Creators
- P.R. Blavatskyy (Author/Creator)
- Publication Details
- Theory and Decision, Vol.76(2), pp.265-286
- Publisher
- Springer Netherlands
- Identifiers
- 991005545224007891
- Copyright
- © 2013 Springer Science+Business Media New York.
- Murdoch Affiliation
- Murdoch University
- Language
- English
- Resource Type
- Journal article
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Source: InCites
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- Citation topics
- 6 Social Sciences
- 6.122 Economic Theory
- 6.122.1287 Risk Preferences
- Web Of Science research areas
- Economics
- Social Sciences, Mathematical Methods
- ESI research areas
- Economics & Business