Decision Making under Uncertainty: An Experimental Study in Market Settings

We implement nonparametric revealed-preference tests of subjective expected utility theory and its generalizations. We find that a majority of subjects' choices are consistent with the maximization of some utility function. They respond to price changes in the direction subjective expected utility theory predicts, but not to a degree that makes them consistent with the theory. Maxmin expected utility a dds no explanatory power. The degree of deviations from the theory is uncorrelated with demographic characteristics. Our findings are essentially the same in laboratory data with a student population and in a panel survey with a general sample of the U.S. population.