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Revealed Preferences, Choices, and Psychological Indexes

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  • Ivan Soraperra

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    (University of Trento)

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    Abstract

    This paper develops a model of choice that embeds some psychological aspects affecting decision maker's behaviour. In the model, the decision maker attaches an unobservable psychological index -representing, e.g., the level of perceived availability or the level of salience- to each alternative in a universal collection. Choice behaviour of the decision maker is then conditioned by the indexes attached to the alternatives. With this paper we show that, if the conditional choice behaviour satisfies two intuitively appealing properties -namely Monotonicity and Conditional IIA- then the observable part of the choice behaviour, i.e., the unconditional choices, can be interpreted as the product of the maximization of a preference relation. The paper discusses also some welfare consideration regarding the choice model and finally some interpretations of the indexes are provided.

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    Bibliographic Info

    Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 643.

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    Date of creation: Apr 2009
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    Handle: RePEc:qmw:qmwecw:wp643

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    Related research

    Keywords: Revealed preferences; Choice with frame; Salience; Scarcity bias; Bandwagon effect; Snob effect;

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    1. Anonymous, 2008. "Abstracts of Ph.D. Theses," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 21(2), December.
    2. Luigi Mittone & Lucia Savadori & Rino Rumiati, 2005. "Does scarcity matter in children's behavior? A developmental perspective of the basic scarcity bias," CEEL Working Papers 0501, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    3. Luigi Mittone & Lucia Savadori, 2005. "The Scarcity Bias," CEEL Working Papers 0505, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    4. Green, Jerry & Hojman, Daniel, 2007. "Choice, Rationality and Welfare Measurement," Working Paper Series rwp07-054, Harvard University, John F. Kennedy School of Government.
    5. B. Douglas Bernheim & Antonio Rangel, 2008. "Beyond Revealed Preference: Choice Theoretic Foundations for Behavioral Welfare Economics," NBER Working Papers 13737, National Bureau of Economic Research, Inc.
    6. Lynn, Michael, 1989. "Scarcity effects on desirability: Mediated by assumed expensiveness?," Journal of Economic Psychology, Elsevier, vol. 10(2), pages 257-274, June.
    7. Bauer Daniel & Börger Matthias & Ruß Jochen & Zwiesler Hans-Joachim, 2008. "The Volatility of Mortality," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 3(1), pages 1-29, September.
    8. Anonymous, 2008. "Abstracts of M.Sc. Theses," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 21(2), December.
    9. Anonymous, 2008. "Sam Spade and Self-Interest," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages BackCover-B, 04.
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