Daniel Bernoulli put his

expected utility hypothesis to the task of explaining the St.

Likewise, should the preferences be consistent with the

expected utility hypothesis? Numerous arguments have been made for moving away from the von Neumann-Morgenstern framework - for example, Epstein and Zin [1991], Farmer [1990] and Weil [1990], to cite but a few.

If the decision maker's uncertainty cannot be completely characterized by probability measures, then the behavioral models based on the subjective

expected utility hypothesis (SEU) are not appropriate.

Individual preferences over random lifetime consumption are supposed to satisfy the

expected utility hypothesis. Thus there is a function U: [IR.sub.++] [right arrow] IR evaluating sure consumption bundles such that the utility derived from deterministic current consumption, c, and stochastic future consumption, [Mathematical Expression Omitted], can be represented as [Mathematical Expression Omitted].

The

expected utility hypothesis is somewhat controversial.(1) Not only has it met difficulty in experimental studies,(2) but its theoretical status and traditional defense have been questioned [6; 3].

In 1944 von Neumann and Morgenstern had published their seminal book entitled Theory of Games and Economic Behavior which provided an axiomatic foundation for the

expected utility hypothesis. In the 1950s Arrow and Debreu (1954) laid the foundations of general equilibrium theory.