Barbos, Andrei (2008): A Reference Dependent Representation with Subjective Tastes.
Download (333Kb) | Preview
Experimental and empirical evidence documents instances where the presence of an inferior option in a menu increases the attractiveness of the better options from that menu and thus distorts the normative ranking across menus. We analyze the case when besides this so called context effects bias there is also a concern for flexibility in the spirit of the literature initiated by Kreps (1979) and Dekel, Lipman and Rustichini (2001). Since the context effects bias and the desire for flexibility both increase the inclination of a decision maker to choose larger menus, the analysis allows the disentangling of the effect of the behavioral bias from the effect of the rational desire from flexibility. We find a weak condition on the set of ex post preferences under which the two effects are identifiable. We show that our representation is essentially unique.
|Item Type:||MPRA Paper|
|Original Title:||A Reference Dependent Representation with Subjective Tastes|
|Keywords:||Context Effects; Reference Point Bias; Subjective Uncertainty|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty|
|Depositing User:||Andrei Barbos|
|Date Deposited:||13. Jul 2010 09:06|
|Last Modified:||14. Feb 2013 05:33|
Aliprantis, C., and K. Border (1999): Infinite Dimensional Analysis. Berlin, Germany: Springer-Verlag.
Barbos, A. (2009): "Context Effects: A Representation of Choices from Categories," forthcoming, Journal of Economic Theory.
Dekel, E. and B. Lipman and A. Rustichini (2001): "Representing Preferences with a Unique Subjective State Space," Econometrica , 69, 891-934.
Dekel, E. and B. Lipman and A. Rustichini (2009): "Temptation Driven Preferences," Review of Economic Studies, 76, 937-971.
Dekel, E. and B. Lipman, A. Rustichini and T. Sarver (2007): "Representing Preferences with a Unique Subjective State Space: Corrigendum," Econometrica, 75, 591-600.
Epstein, L.G., and I. Kopylov (2007): "Cold Feet," Theoretical Economics, 2, 231-259.
Gul, F., and W. Pesendorfer (2001): "Temptation and Self-Control," Econometrica, 69, 1403-1435.
Kopylov, I. (2009): "Finite Additive Utility Representations for Preferences over Menus," Journal of Economic Theory, 144,354-374.
Kopylov, I., and J. Noor (2009): "Self-Deception and Choice," mimeo, Boston University.
Kreps, D.M. (1979): "A Representation Theorem for 'Preference for Flexibility'," Econometrica, 47, 565-576.
Neilson, W. (2006): "Axiomatic Reference-Dependence in Behavior Towards Others and Toward Risk," Economic Theory, 28, 681-692.
Ok, E.A., P. Ortoleva, G. Riella (2009): "Revealed (p)reference theory", mimeo, New York University.
Royden, H.L. (1988): Real Analysis, 3rd edition, NJ: Prentice Hall.
Sarver, T. (2008): "Anticipating Regret: Why Fewer Options May Be Better," Econometrica, 76, 263-305.
Simonson, I. and A. Tversky (1992): "Choice in Context: Trade-off Contrast and Extremeness Aversion," Journal of Marketing Research, 29, 281-295.
Available Versions of this Item
- A Reference Dependent Representation with Subjective Tastes. (deposited 13. Jul 2010 09:06) [Currently Displayed]