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Characterizing Behavioral Decisions with Choice Data

  • Ghosal, Sayantan

    (University of Warwick)

  • Dalton, Patricio

    (Tilberg University)

This paper provides an axiomatic characterization of choices in a setting where a decision-maker may not fully internalize all the consequences of her choices on herself. Such a departure from rationality, it turns out, is common across a variety of positive behavioral models and admits the standard rational choice model as a special case. We show that choice data satisfying (a) Sen’s axioms and fully characterize behavioral decisions, and (b) Sen’s axiom and fully characterize standard decision-making. In addition, we show that (a) it is possible to identify a minimal and a maximal set of psychological states using choice data alone, and (b) under specific choice scenarios, "revealed mistakes" can be inferred directly from choice data.

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Paper provided by Competitive Advantage in the Global Economy (CAGE) in its series CAGE Online Working Paper Series with number 107.

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Date of creation: 2013
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Handle: RePEc:cge:wacage:107
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