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Friday, May 10, 2019
12:00 PM - 1:00 PM
Baxter 125

Social and Information Sciences Laboratory (SISL) Seminar

Intertemporal Consumption With Risk: A Revealed Preference Analysis
Songfa Zhong, Associate Professor, Department of Economics, National University of Singapore; 2018-2019 NUS Fellow, Center for Advanced Study in the Behavioral Sciences, Stanford University,

Abstract: This paper presents a non-parametric, revealed preference analysis of intertemporal consumption with risk. In an experimental setting, subjects allocate tokens over four commodities, consisting of consumption in two contingent states and at two time periods, subject to different budget constraints. With this data, one could test, using Afriat's Theorem and its generalizations, whether a subject's choices are consistent with utility maximization, and also utility maximization with various additional properties on the utility function. Our results broadly support a model where subjects maximize a utility function that is weakly separable across states but there is little support for weak separability across time. Our result sheds light on the source of the failure of the discounted expected utility model.

For more information, please contact Mary Martin by phone at 626-395-4571 or by email at mmartin@caltech.edu