IDEAS home Printed from https://ideas.repec.org/a/blg/reveco/v72y2020i1p65-75.html
   My bibliography  Save this article

Construction Of Preferences

Author

Listed:
  • GHIURCÄ‚ Camelia

Abstract

Standard economic theory suggests that people's preferences are revealed by their behavior. However, behavioral economics states that often preferences are constructed mainly because of the limited rationality people have. This paper illustrates the behavioral theory of decision making focusing on judgement under certainty and decision-making under uncertainty. The existence of the phenomenon of preference reversal together with mental accounting and the other four effects - endowment, anchoring, decoy and framing - presented above suggests the discrepancy between the standard model of choice under certainty and what usually happens in practice and certified the fact that in real world preferences are not revealed, but constructed.

Suggested Citation

  • GHIURCÄ‚ Camelia, 2020. "Construction Of Preferences," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 72(1), pages 65-75, April.
    • Handle: RePEc:blg:reveco:v:72:y:2020:i:1:p:65-75
    as

    Download full text from publisher

    File URL: http://economice.ulbsibiu.ro/revista.economica/archive/72107ghiurca.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hausman,Daniel M., 2012. "Preference, Value, Choice, and Welfare," Cambridge Books, Cambridge University Press, number 9781107015432.
    2. Hausman,Daniel M., 2012. "Preference, Value, Choice, and Welfare," Cambridge Books, Cambridge University Press, number 9781107695122.
    3. James G. March, 1978. "Bounded Rationality, Ambiguity, and the Engineering of Choice," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 587-608, Autumn.
    4. Tversky, Amos & Thaler, Richard H, 1990. "Anomalies: Preference Reversals," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 201-211, Spring.
    5. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    6. Knetsch, Jack L, 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves," American Economic Review, American Economic Association, vol. 79(5), pages 1277-1284, December.
    7. Dan Ariely & George Loewenstein & Drazen Prelec, 2003. ""Coherent Arbitrariness": Stable Demand Curves Without Stable Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 73-106.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jacobs Martin, 2016. "Accounting for Changing Tastes: Approaches to Explaining Unstable Individual Preferences," Review of Economics, De Gruyter, vol. 67(2), pages 121-183, August.
    2. Dorian Jullien & Nicolas Vallois, 2014. "A probabilistic ghost in the experimental machine," Journal of Economic Methodology, Taylor & Francis Journals, vol. 21(3), pages 232-250, September.
    3. Francesco GUALA, 2017. "Preferences: Neither Behavioural nor Mental," Departmental Working Papers 2017-05, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    4. Moscati, Ivan, 2021. "On the recent philosophy of decision theory," LSE Research Online Documents on Economics 115039, London School of Economics and Political Science, LSE Library.
    5. Marek Jenöffy, 2023. "A Seesaw Model of Choices," Working Papers hal-04136550, HAL.
    6. Mattauch, Linus & Hepburn, Cameron, 2016. "Climate policy when preferences are endogenous – and sometimes they are," INET Oxford Working Papers 2016-04, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    7. Christopher K. Hsee & Yuval Rottenstreich & Alois Stutzer, 2012. "Suboptimal choices and the need for experienced individual well-being in economic analysis," International Journal of Happiness and Development, Inderscience Enterprises Ltd, vol. 1(1), pages 63-85.
    8. Cheng LI, 2020. "The rationality principle as a universal grammar of economic explanations," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 13(2), pages 58-80, November.
    9. Sören Bär & Laura Korrmann & Markus Kurscheidt, 2022. "How Nudging Inspires Sustainable Behavior among Event Attendees: A Qualitative Analysis of Selected Music Festivals," Sustainability, MDPI, vol. 14(10), pages 1-26, May.
    10. Luca Congiu & Ivan Moscati, 2022. "A review of nudges: Definitions, justifications, effectiveness," Journal of Economic Surveys, Wiley Blackwell, vol. 36(1), pages 188-213, February.
    11. Víctor Alberto Pena & Alina Gómez-Mejía, 2019. "Effect of the anchoring and adjustment heuristic and optimism bias in stock market forecasts," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 11(2), pages 389-409, November.
    12. Marek Jenöffy-Lochau, 2013. "Information, Credibility, and Endogenous Preferences," Post-Print hal-04139636, HAL.
    13. Aravena, Claudia & Martinsson, Peter & Scarpa, Riccardo, 2014. "Does money talk? — The effect of a monetary attribute on the marginal values in a choice experiment," Energy Economics, Elsevier, vol. 44(C), pages 483-491.
    14. Rodolfo Garcia Sierra & Alvaro Zerda Sarmiento, 2016. "Hydropower Megaprojects in Colombia and the Influence of Local Communities: A View from Prospect Theory to Decision Making Process based on Expert Judgment used in Large Organizations," International Journal of Energy Economics and Policy, Econjournals, vol. 6(3), pages 408-420.
    15. Guilhem Lecouteux & Léonard Moulin, 2013. "From welfare to preferences, do decision flaws matter? The case of tuition fees," Working Papers hal-00807687, HAL.
    16. Marek Jenöffy-Lochau, 2023. "Preference Formation and Economic Theory," Working Papers hal-04139498, HAL.
    17. Margit Osterloh, 2007. "Psychologische Ökonomik: Integration statt Konfrontation," Schmalenbach Journal of Business Research, Springer, vol. 59(56), pages 82-111, January.
    18. Steven J. Humphrey & Nadia-Yasmine Kruse, 2024. "Who accepts Savage’s axiom now?," Theory and Decision, Springer, vol. 96(1), pages 1-17, February.
    19. Pere Mir-Artigues, 2022. "Combining preferences and heuristics in analysing consumer behaviour," Evolutionary and Institutional Economics Review, Springer, vol. 19(2), pages 523-543, September.
    20. Jose Apesteguia & Miguel Ballester, 2009. "A theory of reference-dependent behavior," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 40(3), pages 427-455, September.

    More about this item

    Keywords

    Behavioural Economics; Preference Construction; Preference Reversal; Framing Effects; Mental Accounting.;
    All these keywords.

    JEL classification:

    • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:blg:reveco:v:72:y:2020:i:1:p:65-75. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Eduard Alexandru Stoica (email available below). General contact details of provider: https://edirc.repec.org/data/feulbro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.