A Reference Dependent Representation with Subjective Tastes
AbstractExperimental 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 23850.
Date of creation: 14 Mar 2010
Date of revision: 02 Feb 2010
Context Effects; Reference Point Bias; Subjective Uncertainty;
Other versions of this item:
- Barbos, Andrei, 2013. "A reference-dependent representation with subjective tastes," Journal of Mathematical Economics, Elsevier, vol. 49(2), pages 111-123.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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