A Non Parametric Test of the Expected Utility Hypothesis
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A nonparametric test of the expected utility hypothesis is developed. It is shown
that the expected utility hypothesis holds if there exists a feasible solution to a system of linear inequalities. Furthermore, when a feasible solution exists boundaries on the coefficient of absolute risk aversion can be calculated explicitly. The test is applied to data on land allocations that are modeled as choices over lottery sets. The result is that the expected utility hypothesis cannot be rejected in most of the cases. This result is in contrast to results obtained in many laboratory experiments.