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Choice, Deferral and Consistency

Listed author(s):
  • Miguel Costa-Gomes
  • Carlos Cueva
  • Georgios Gerasimou

    ()

  • Matus Tejiscak

We conduct a novel experiment in which subjects are forced to choose one of several real goods in one treatment, but are not forced to choose, and can instead incur a small cost to defer choice, in the other treatment. We find that forcing subjects to choose, which is the convention in choice experiments, leads to relatively higher rates of choice reversals. This implies that standard choice experiments may lead researchers to overestimate the fraction of subjects that do not maximize a stable and transitive preference relation. We then use a new combinatorial-optimization method that detects a subject’s possibly incomplete (due to indecisiveness) or truncated (due to undesirability) preferences by minimizing the number of switches to her active choices and/or choice deferrals that are necessary to generate behavior consistent with maximization of such preferences. Slightly above one half of our subjects' decisions are best explained by such preferences or by a Bayesian preference for information, whereas the rest are best explained by standard utility maximization.

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File URL: http://www.st-andrews.ac.uk/~wwwecon/repecfiles/4/1416.pdf
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Paper provided by Department of Economics, University of St. Andrews in its series Discussion Paper Series, Department of Economics with number 201416.

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Date of creation: 12 Dec 2014
Date of revision: 26 Dec 2016
Handle: RePEc:san:wpecon:1416
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