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When Are Preferences Consistent? The Effects of Task Familiarity and Contextual Cues on Revealed and Stated Preferences


Schlaepfer, Felix; Fischhoff, Baruch (2010). When Are Preferences Consistent? The Effects of Task Familiarity and Contextual Cues on Revealed and Stated Preferences. Working paper series / Socioeconomic Institute No. 1007, University of Zurich.

Abstract

Traditionally, economists make a sharp distinction between stated and revealed preferences, viewing the latter as more fully meeting the assumptions of economic analysis. Here, we consider one form of empirical evidence regarding this belief: the consistency of choices in stated and revealed preference tasks. We show that both kinds of task can produce consistent choices, suggesting that both can measure underlying preferences, if necessary conditions are met. We propose that a necessary condition is that task be either familiar to those facing it or offer contextual cues that substitute for familiarity, such as prices in competitive markets or recommendations from trusted, knowledgeable sources. We show that how well decision makers achieve such understanding is often confounded with the method that researchers use. Considering task familiarity not only clarifies some of the conflicting evidence regarding revealed and stated preference methods, but raises potentially productive questions regarding the roles of social institutions in shaping preferences.

Traditionally, economists make a sharp distinction between stated and revealed preferences, viewing the latter as more fully meeting the assumptions of economic analysis. Here, we consider one form of empirical evidence regarding this belief: the consistency of choices in stated and revealed preference tasks. We show that both kinds of task can produce consistent choices, suggesting that both can measure underlying preferences, if necessary conditions are met. We propose that a necessary condition is that task be either familiar to those facing it or offer contextual cues that substitute for familiarity, such as prices in competitive markets or recommendations from trusted, knowledgeable sources. We show that how well decision makers achieve such understanding is often confounded with the method that researchers use. Considering task familiarity not only clarifies some of the conflicting evidence regarding revealed and stated preference methods, but raises potentially productive questions regarding the roles of social institutions in shaping preferences.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Socioeconomic Institute (former)
Dewey Decimal Classification:330 Economics
JEL Classification:D01, D03, Q51
Language:English
Date:August 2010
Deposited On:29 Nov 2011 15:09
Last Modified:05 Apr 2016 15:09
Series Name:Working paper series / Socioeconomic Institute
Official URL:http://www.econ.uzh.ch/wp.html
Permanent URL: http://doi.org/10.5167/uzh-51790

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