Testing the expected utility maximization hypothesis with limited experimental data

• Published in: Japan and the world economy Vol. 16; no. 3; pp. 391 - 407
• Main Authors: Cooper, James B., Russell, Thomas, Samuelson, Paul A.
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01-08-2004; Elsevier
• Series: Japan and the World Economy
• Subjects: Business cycles; Economic conservation laws; Economic theory; Energy conservation; Expected utility; Globalization; International relations; Limited experimental data; Recovering preferences; Utility theory; Recovering preferences; Expected utility; Limited experimental data
• ISSN: 0922-1425; 1879-2006
• DOI: 10.1016/j.japwor.2003.12.005

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.