arXiv subjects

Matthew Polisson

Publications and source records attributed to Matthew Polisson.

3 recordsLinked to original sources

arXiv2026

Ever since Ellsberg

Ellsberg's famous paradox challenged Savage's subjective expected utility theory (EUT) -- which reduces uncertainty to risk -- by suggesting an aversion toward ambiguity. We provide a revealed preference test of the full set of axioms underpinning subjective EUT under uncertainty and compare it to an analogous test of objective EUT under risk. We find that individual choices are as consistent with utility maximization and expected utility maximization under uncertainty as they are under risk. Nevertheless, there is greater empirical scope for non-EUT models under uncertainty than under risk, and the absolute and relative consistency of EUT and non-EUT models vary considerably across subjects.

econ.GN↗

arXiv2024

Rationalizability, Cost-Rationalizability, and Afriat's Efficiency Index

This note explains the equivalence between approximate rationalizability and approximate cost-rationalizability within the context of consumer demand. In connection with these results, we interpret Afriat's (1973) critical cost efficiency index (CCEI) as a measure of approximate rationalizability through cost inefficiency, in the sense that an agent is spending more money than is required to achieve her utility targets.

econ.GN↗

arXiv2024

Revealed preference with optimal transport: money pumps, bounded rationality, and preference recovery

This paper explores the connection between two distinct notions of irrationality: the extent to which the consumer fails to maximize his utility function and the extent to which the consumer can be turned into a money pump. We show that the amount of money which can be pumped by an arbitrageur is equal to both (i) the minimum amount of money which the consumer overpays to attain his utility targets (minimum over all utility functions) and (ii) the minimum amount of wasted quasilinear utility (minimum again over all utility functions). Under the assumption that the consumer's true utility function belongs to the aforementioned argmins, we present a method for recovering this true utility function even when choices are non-optimal. Further, we show that this recovered utility function can be interpreted as belonging to a utility maximizing consumer who systematically mis-perceives prices. These results and many more are proved by exploiting a novel connection between revealed preference analysis and optimal transport.

econ.TH↗