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Identifying Belief-dependent Preferences

Author

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  • Enrico Mattia Salonia

    (Toulouse School of Economics)

Abstract

Why are investors overconfident and trade excessively? Why do patients at health risk avoid testing? Why are voters polarised? Possibly because their beliefs directly influence their well-being, i.e., they have belief-dependent preferences. However, existing theories of belief-dependent preferences struggle to generate testable predictions or to identify simultaneously beliefs and preferences. This paper addresses these issues by providing an axiomatic characterization of a class of preferences and belief-updating rules that deviate from Bayesian updating. Preferences, beliefs, and updating rules are identified from choices over contingent menus, each entailing a menu of acts available at a later time contingent on an uncertain state of the world. The results provide a theory-based approach to experimental designs to test information avoidance, distortion, and other behaviours consistent with beliefdependent preferences.

Suggested Citation

  • Enrico Mattia Salonia, 2025. "Identifying Belief-dependent Preferences," CEIS Research Paper 599, Tor Vergata University, CEIS, revised 27 May 2025.
    • Handle: RePEc:rtv:ceisrp:599
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    More about this item

    Keywords

    Belief-dependent preferences; Non-Bayesian updating; Information avoidance; Belief distortion; Contingent menus;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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