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Approximate Expected Utility Rationalization

  • Series
  • Speaker(s)
    Frederico Echenique (California Institute of Technology, United States)
  • Field
    Empirical Microeconomics
  • Location
    Erasmus University, Polak Building, Room 2-14
  • Date and time

    May 06, 2019
    12:00 - 13:00


We propose a new measure of deviations from expected utility, given data on economic choices under risk and uncertainty. Given a positive number e, we provide a characterization of the datasets with a rationalization that is within e (in beliefs, utility, or perceived prices) of expected utility theory. The number e can then be used as a measure of distance from the data to the theory. We apply our methodology to three recent large-scale experiments. Many subjects in those experiments are consistent with utility maximization, but not with expected utility maximization. The correlation of our measure with demographic characteristics is also interesting, and provides new and intuitive findings on expected utility.


with Taisuke Imai and Kota Saito