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Robert Sproule and Calin Valsan
''A simple test for the violation of the non-satiation axiom under uncertainty: The theory ''
( 2009, Vol. 29 No.4 )
The validity of most axioms which underlie the expected utility model has been the object of intense empirical testing. These include the independence, betweenness, transitivity, monotonicity, reduction, and non-satiation axioms. The sole, present-day test for the non-satiation axiom is predicated on the first-degree stochastic dominance theorem. This paper outlines the theory for a new, alternative test – one that is predicated on a mean-variance-preserving transformation of a one-trial binomial distribution.
Keywords: Von Neumann-Morgenstern Utility Function, Expected Utility Hypothesis, Non-Satiation Axiom, Binomial Trial, Mean-variance-preserving transformation
JEL: B4 - Economic Methodology: General
Manuscript Received : Jul 25 2009 Manuscript Accepted : Oct 25 2009

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