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Consistent inconsistencies? Evidence from decision under risk

Author

Listed:
  • Guillaume Hollard

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

  • Hela Maafi

    (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis)

  • Jean-Christophe Vergnaud

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

Conventional economic theory assumes that agents should be consistent across decisions. However, it is often observed that experimental subjects fail to report consistent preferences. So far, these inconsistencies are almost always examined singly. We thus wonder whether the more inconsistent individuals in one task are also more inconsistent in other tasks. We propose an experiment in which subjects are asked to report their preferences over risky bets so as to obtain, for each subject, three measures of inconsistencies: classical preference reversals, framing effects and preference instability. In line with previous experimental findings, subjects are largely inconsistent according to each of these three measures and there are considerable individual differences. The main result is that we find no correlation among these three measures of inconsistency.

Suggested Citation

  • Guillaume Hollard & Hela Maafi & Jean-Christophe Vergnaud, 2016. "Consistent inconsistencies? Evidence from decision under risk," Post-Print hal-01306250, HAL.
    • Handle: RePEc:hal:journl:hal-01306250
    DOI: 10.1007/s11238-015-9518-8
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    References listed on IDEAS

    as
    1. Loomes, Graham & Moffatt, Peter G & Sugden, Robert, 2002. "A Microeconometric Test of Alternative Stochastic Theories of Risky Choice," Journal of Risk and Uncertainty, Springer, vol. 24(2), pages 103-130, March.
    2. repec:bla:jecsur:v:16:y:2002:i:5:p:621-55 is not listed on IDEAS
    3. Berg, Joyce E. & Dickhaut, John W. & Rietz, Thomas A., 2010. "Preference reversals: The impact of truth-revealing monetary incentives," Games and Economic Behavior, Elsevier, vol. 68(2), pages 443-468, March.
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    9. Shane Frederick, 2005. "Cognitive Reflection and Decision Making," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 25-42, Fall.
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    13. Levin, Irwin P. & Schneider, Sandra L. & Gaeth, Gary J., 1998. "All Frames Are Not Created Equal: A Typology and Critical Analysis of Framing Effects," Organizational Behavior and Human Decision Processes, Elsevier, vol. 76(2), pages 149-188, November.
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    Cited by:

    1. Lei Zhou & Nan Liu & Ya-Qiong Liao & Ai-Mei Li, 2021. "Risky choice framing with various problem descriptions: A replication and extension study," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 16(2), pages 394-421, March.
    2. Matthew Ryan, 2018. "Uncertainty and binary stochastic choice," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(3), pages 629-662, May.
    3. repec:cup:judgdm:v:16:y:2021:i:2:p:394-421 is not listed on IDEAS

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    More about this item

    Keywords

    Heterogeneity; Consistency; Preference reversals; Framing effects;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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