New developments in revealed preference theory: decisions under risk, uncertainty, and intertemporal choice

TL;DR

This survey reviews recent advances in revealed preference theory, focusing on expected utility, uncertainty, and intertemporal choice, highlighting their testable implications in economic decision-making.

Contribution

It synthesizes recent developments in revealed preference theory across various decision-making contexts, emphasizing their common testable implications.

Findings

Expected utility theories imply an inverse relation between prices and quantities.

Different theories specify qualifications for this inverse relation.

The survey links classical data to modern theoretical developments.

Abstract

This survey reviews recent developments in revealed preference theory. It discusses the testable implications of theories of choice that are germane to specific economic environments. The focus is on expected utility in risky environments; subjected expected utility and maxmin expected utility in the presence of uncertainty; and exponentially discounted utility for intertemporal choice. The testable implications of these theories for data on choice from classical linear budget sets are described, and shown to follow a common thread. The theories all imply an inverse relation between prices and quantities, with different qualifications depending on the functional forms in the theory under consideration.