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Stochastic choice, systematic mistakes and preference estimation

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  • Breitmoser, Yves

Abstract

Individual choice exhibits "presentation effects" such as default, ordering and round-number effects. Using existing models, presentation effects bias utility estimates, which suggests instability of preferences and obscures behavioral patterns. This paper derives a generalized model of stochastic choice by weakening logit's axiomatic foundation. Weakening the axioms implies that focality of options is choice-relevant, alongside utility, which entails presentation effects. The model is tested on four well-known studies of dictator games exhibiting typical round-number patterns. The generalized logit model captures the choice patterns reliably, substantially better than existing models: it robustly predicts and controls for the round-number effects, thus provides "clean" utility estimates that are stable and predictive across experiments.

Suggested Citation

  • Breitmoser, Yves, 2016. "Stochastic choice, systematic mistakes and preference estimation," MPRA Paper 72779, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:72779
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    References listed on IDEAS

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    More about this item

    Keywords

    stochastic choice; systematic mistakes; axiomatic foundation; utility estimation; dictator game;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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