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Is Kreps-Porteus utility distinguishable from intertemporal expected utility?

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Summary

In a Lucas (1978) model, with a Kreps-Porteus (1978) nonexpected utility, the following property of equilibrium holds generically in the space of finite-state, Markov output growth rate processes: equilibrium price of equity is distinct from that implied by any intertemporally additive expected utility satisfying specified regularity conditions. In that sense the more general utility functions are observationally distinguishable from the standard expected utility specification.

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Authors and Affiliations

  1. Department of Economics, Concordia University, 1455 De Maisonneuve Blvd. W., H36 1M8, Montreal, Quebec, Canada

    Susheng Wang

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  1. Susheng Wang
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I would like to thank Larry G. Epstein for posing to me the problem studied in this paper and for many suggestions and comments. I am also grateful to Darrell Duffie for helpful suggestions. I am responsible for errors. This papers is part of my Ph.D. thesis at University of Toronto.

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Wang, S. Is Kreps-Porteus utility distinguishable from intertemporal expected utility?. Econ Theory 3, 119–127 (1993). https://doi.org/10.1007/BF01213696

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  • DOI: https://doi.org/10.1007/BF01213696

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