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Are preferences complete? An experimental measurement of indecisiveness under risk

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  • Eric Danan

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  • Anthony Ziegelmeyer

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Abstract

We propose an experimental design allowing a behavioral test of the axiom of completeness of individual preferences. The central feature of our design consists in enabling subjects to postpone commitment at a small cost. Our main result is that preferences are significantly incomplete. We use lotteries as choice alternatives and we find that risk aversion is globally robust to preference incompleteness.

Suggested Citation

  • Eric Danan & Anthony Ziegelmeyer, 2006. "Are preferences complete? An experimental measurement of indecisiveness under risk," Papers on Strategic Interaction 2006-01, Max Planck Institute of Economics, Strategic Interaction Group.
  • Handle: RePEc:esi:discus:2006-01
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    File URL: ftp://papers.econ.mpg.de/esi/discussionpapers/2006-01.pdf
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    References listed on IDEAS

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    1. Beattie, Jane & Loomes, Graham, 1997. "The Impact of Incentives upon Risky Choice Experiments," Journal of Risk and Uncertainty, Springer, vol. 14(2), pages 155-168, March.
    2. Dhar, Ravi, 1997. " Consumer Preference for a No-Choice Option," Journal of Consumer Research, Oxford University Press, vol. 24(2), pages 215-231, September.
    3. Dubra, Juan & Maccheroni, Fabio & Ok, Efe A., 2004. "Expected utility theory without the completeness axiom," Journal of Economic Theory, Elsevier, vol. 115(1), pages 118-133, March.
    4. Robin Cubitt & Chris Starmer & Robert Sugden, 1998. "On the Validity of the Random Lottery Incentive System," Experimental Economics, Springer;Economic Science Association, vol. 1(2), pages 115-131, September.
    5. Luca Rigotti & Chris Shannon, 2005. "Uncertainty and Risk in Financial Markets," Econometrica, Econometric Society, vol. 73(1), pages 203-243, January.
    6. Starmer, Chris & Sugden, Robert, 1991. "Does the Random-Lottery Incentive System Elicit True Preferences? An Experimental Investigation," American Economic Review, American Economic Association, vol. 81(4), pages 971-978, September.
    7. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
    8. Arlegi, Ricardo & Nieto, Jorge, 2001. "Incomplete preferences and the preference for flexibility," Mathematical Social Sciences, Elsevier, vol. 41(2), pages 151-165, March.
    9. Sen, Amartya, 1988. "Freedom of choice : Concept and content," European Economic Review, Elsevier, vol. 32(2-3), pages 269-294, March.
    10. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    11. Dekel, Eddie & Lipman, Barton L & Rustichini, Aldo, 2001. "Representing Preferences with a Unique Subjective State Space," Econometrica, Econometric Society, vol. 69(4), pages 891-934, July.
    12. Susan K. Laury, 2006. "Pay One or Pay All: Random Selection of One Choice for Payment," Experimental Economics Center Working Paper Series 2006-24, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    13. Holt, Charles A, 1986. "Preference Reversals and the Independence Axiom," American Economic Review, American Economic Association, vol. 76(3), pages 508-515, June.
    14. Eliaz, Kfir & Ok, Efe A., 2006. "Indifference or indecisiveness? Choice-theoretic foundations of incomplete preferences," Games and Economic Behavior, Elsevier, vol. 56(1), pages 61-86, July.
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    Citations

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    Cited by:

    1. Chaikal Nuryakin & Alistair Munro, 2016. "Experiments on Lotteries for Shrouded and Bundled Goods: Investigating The Economics of Fukubukuro," GRIPS Discussion Papers 15-24, National Graduate Institute for Policy Studies.
    2. Minardi, Stefania & Savochkin, Andrei, 2015. "Preferences with grades of indecisiveness," Journal of Economic Theory, Elsevier, vol. 155(C), pages 300-331.
    3. repec:eee:jetheo:v:170:y:2017:i:c:p:417-425 is not listed on IDEAS
    4. Özgür Evren, 2012. "Scalarization Methods and Expected Multi-Utility Representations," Working Papers w0174, Center for Economic and Financial Research (CEFIR).
    5. Wilde, Christian & Krahnen, Jan Pieter & Ockenfels, Peter, 2014. "Measuring Ambiguity Aversion: A Systematic Experimental Approach," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100557, Verein für Socialpolitik / German Economic Association.
    6. Cerreia-Vioglio, Simone & Maccheroni, Fabio & Marinacci, Massimo & Montrucchio, Luigi, 2013. "Ambiguity and robust statistics," Journal of Economic Theory, Elsevier, vol. 148(3), pages 974-1049.
      • Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2011. "Ambiguity and Robust Statistics," Working Papers 382, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    7. Mc Kiernan, Daniel Kian, 2012. "Indifference, indecision, and coin-flipping," Journal of Mathematical Economics, Elsevier, vol. 48(4), pages 237-246.
    8. Qiu, Jianying & Ong, Qiyan, 2017. "Indifference or indecisiveness: a strict discrimination," MPRA Paper 81440, University Library of Munich, Germany, revised 18 Sep 2017.
    9. repec:kap:theord:v:83:y:2017:i:3:d:10.1007_s11238-017-9600-5 is not listed on IDEAS
    10. Costa-Gomes, Miguel & Cueva, Carlos & Gerasimou, Georgios, 2014. "Choice, Deferral and Consistency," SIRE Discussion Papers 2015-17, Scottish Institute for Research in Economics (SIRE).
    11. Gerasímou, Georgios, 2010. "Consumer theory with bounded rational preferences," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 708-714, September.
    12. Itzhak Gilboa & Fabio Maccheroni & Massimo Marinacci & David Schmeidler, 2010. "Objective and Subjective Rationality in a Multiple Prior Model," Econometrica, Econometric Society, vol. 78(2), pages 755-770, March.
    13. Elena Cettolin & Arno Riedl, 2015. "Revealed Incomplete Preferences under Uncertainty," CESifo Working Paper Series 5359, CESifo Group Munich.
    14. Costa-Gomes, Miguel & Cueva, Carlos & Gerasimou, Georgios, 2014. "Choice, Deferral and Consistency," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-17, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. Miguel Costa-Gomes & Carlos Cueva & Georgios Gerasimou & Matus Tejiscak, 2014. "Choice, Deferral and Consistency," Discussion Paper Series, Department of Economics 201416, Department of Economics, University of St. Andrews, revised 26 Dec 2016.
    16. Evren, Özgür, 2014. "Scalarization methods and expected multi-utility representations," Journal of Economic Theory, Elsevier, vol. 151(C), pages 30-63.
    17. Qiu, Jianying & Ong, Qiyan, 2017. "Indifference or indecisiveness: a strict discrimination," MPRA Paper 81790, University Library of Munich, Germany, revised 18 Sep 2017.
    18. Evren, Özgür & Ok, Efe A., 2011. "On the multi-utility representation of preference relations," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 554-563.

    More about this item

    Keywords

    Incomplete preferences; preference for flexibility; risk aversion; indecisiveness; indifference;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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