Discussion Paper

No. 2012-32 | July 06, 2012
Experimental Test of Utility Maximization

Abstract

The study tests the cardinal utility maximization hypothesis by an experimental procedure in a framework of utility scaling approach following the psychophysical-econometric paradigm, conceived in He (Psychophysical Interpretation for Utility Measures, 2011). It reveals (i) the utility maximization can be tested and has been supported by experimental results; (ii) the utility scaling approach following the psychophysical econometric paradigm offers a new foundation to discuss the utility concept; and (iii) it is necessary to distinguish the perception utility and emotion utility to respectively describe economic choices and enjoyment choices.

Data Set

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The data set for this article can be found at: http://hdl.handle.net/1902.1/18501

JEL Classification

A10 D01

Cite As

Yuqing He (2012). Experimental Test of Utility Maximization. Economics Discussion Papers, No 2012-32, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-32

Assessment



Comments and Questions


Anonymous - Referee Report 1
July 23, 2012 - 08:45

see attached file


Yuqing He - Preliminary Reply to Referee Report 1
July 30, 2012 - 08:55

see attached file


Yuqing He - Revised paper and reply to referee report 1
November 11, 2012 - 08:10

See attached file.

In this revised version, a new subsection “1.4 Critical investigations to revealed preference theory” is added. It reveals that revealed preference theory is meaningless as a positive theory.


Anonymous - Invited Reader Comment
August 27, 2012 - 14:47

The paper proposes to test experimentally the cardinal utility maximization hypothesis, and concludes that the experimental data supports this hypothesis. There is data from two variants of a choice experiment where subjects buy quantities of a few different goods, three kinds of nut in one case, and apples, pens and ...[more]

... facial tissues in the other case, plus a variant where the subjects bid on the goods.

Although the experiments seem quite basic the exact design is not easy to understand and instructions are not provided. Only a minority of the subjects seem to have completed the experiments (on page 12 it says that only 38 of 105 subjects delivered valid data in Choice I etc.), which does suggest that there might have been some problems with the design.
Thus it is not clear what information might be gained from this experimental data. In general, I find it difficult to see how an experiment of this kind could be used to gain information about cardinal utility. I’m not sure what to suggest, perhaps to look at the paper by Abdellaouia, Barrios and Wakker (2007) which is certainly relevant for the issue.


Yuqing He - Many thanks to invited reader's comments
August 27, 2012 - 16:29

Many thanks for your comments and suggestions to my paper. They are very helpful for me to improve the work.


Yuqing He - Revised paper and reply to invited reader
November 11, 2012 - 08:13

See attached file.

In this revised version, a new subsection “1.4 Critical investigations to revealed preference theory” is added. It reveals that revealed preference theory is meaningless as a positive theory.