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Strength of preference and decisions under risk

Author

Listed:
  • Carlos Alós-Ferrer
  • Michele Garagnani
Abstract
Influential economic approaches as random utility models assume a monotonic relation between choice frequencies and “strength of preference,” in line with widespread evidence from the cognitive sciences, which also document an inverse relation to response times. However, for economic decisions under risk, these effects are largely untested, because models used to fit data assume them. Further, the dimension underlying strength of preference remains unclear in economics, with candidates including payoff-irrelevant numerical magnitudes. We provide a systematic, out-of-sample empirical validation of these relations (both for choices and response times) relying on both a new experimental design and simulations.

Suggested Citation

  • Carlos Alós-Ferrer & Michele Garagnani, 2019. "Strength of preference and decisions under risk," ECON - Working Papers 330, Department of Economics - University of Zurich, revised Feb 2022.
    • Handle: RePEc:zur:econwp:330
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Alós-Ferrer, Carlos & Garagnani, Michele, 2020. "The cognitive foundations of cooperation," Journal of Economic Behavior & Organization, Elsevier, vol. 175(C), pages 71-85.
    2. Niklas M. Witzig, 2024. "Cognitive Noise and Altruistic Preferences," Working Papers 2415, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    3. Carlos Alós-Ferrer & Johannes Buckenmaier, 2021. "Cognitive sophistication and deliberation times," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 558-592, June.
    4. Duffy, Sean & Gussman, Steven & Smith, John, 2021. "Visual judgments of length in the economics laboratory: Are there brains in stochastic choice?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 93(C).
    5. Duffy, Sean & Smith, John, 2024. "The random thickness of indifference," MPRA Paper 122165, University Library of Munich, Germany.
    6. Mondal, Supratik & Traczyk, Jakub, 2023. "Conditionality of adaptiveness: Investigating the relationship between numeracy and adaptive behavior," Journal of Economic Psychology, Elsevier, vol. 96(C).
    7. Sean, Duffy & John, Smith, 2023. "Stochastic choice and imperfect judgments of line lengths: What is hiding in the noise?," MPRA Paper 116382, University Library of Munich, Germany.
    8. Duffy, Sean & Smith, John, 2020. "An economist and a psychologist form a line: What can imperfect perception of length tell us about stochastic choice?," MPRA Paper 99417, University Library of Munich, Germany.
    9. Duarte Gonc{c}alves, 2024. "Speed, Accuracy, and Complexity," Papers 2403.11240, arXiv.org, revised Jun 2024.
    10. Parra, Daniel, 2024. "Eliciting dishonesty in online experiments: The observed vs. mind cheating game," Journal of Economic Psychology, Elsevier, vol. 102(C).
    11. Niklas M. Witzig, 2024. "Cognitive Noise and Altruistic Preferences," Papers 2410.07647, arXiv.org.
    12. repec:cup:judgdm:v:17:y:2022:i:5:p:1072-1093 is not listed on IDEAS
    13. repec:jdm:journl:v:17:y:2022:i:5:p:1072-1093 is not listed on IDEAS
    14. Alós-Ferrer, Carlos & Garagnani, Michele, 2022. "The gradual nature of economic errors," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 55-66.
    15. Anna Conte & Gianmarco Santis & John D. Hey & Ivan Soraperra, 2023. "The determinants of decision time in an ambiguous context," Journal of Risk and Uncertainty, Springer, vol. 67(3), pages 271-297, December.
    16. Michele Garagnani, 2023. "The predictive power of risk elicitation tasks," Journal of Risk and Uncertainty, Springer, vol. 67(2), pages 165-192, October.

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    More about this item

    Keywords

    Stochastic choice; strength of preference; decision errors; risk attitude;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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