This note explains the equivalence between approximate rationalizability and approximate cost-rationalizability within the context of consumer demand. In connection with these results, we interpret Afriat’s (1973) critical cost efficiency index (CCEI) as a measure of cost (in)efficiency, in...

The Allais critique of expected utility theory (EUT) has led to the development of theories of choice under risk that relax the independence axiom, but which adhere to the conventional axioms of ordering and monotonicity. Unlike many existing labora-tory experiments designed to test...

We develop a nonparametric procedure, called the lattice method, for testing the consistency of contingent consumption data with a broad class of models of choice under risk and under uncertainty. Our method allows for risk loving and elation seeking behavior and can be used to calculate, via...