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Strength of preference and decisions under risk


Alós-Ferrer, Carlos; Garagnani, Michele (2022). Strength of preference and decisions under risk. Working paper series / Department of Economics 330, University of Zurich.

Abstract

Influential economic approaches as random utility models assume a monotonic relation between choice frequencies and “strength of preference,” in line with widespread evidence from the cognitive sciences, which also document an inverse relation to response times. However, for economic decisions under risk, these effects are largely untested, because models used to fit data assume them. Further, the dimension underlying strength of preference remains unclear in economics, with candidates including payoff-irrelevant numerical magnitudes. We provide a systematic, out-of-sample empirical validation of these relations (both for choices and response times) relying on both a new experimental design and simulations.

Abstract

Influential economic approaches as random utility models assume a monotonic relation between choice frequencies and “strength of preference,” in line with widespread evidence from the cognitive sciences, which also document an inverse relation to response times. However, for economic decisions under risk, these effects are largely untested, because models used to fit data assume them. Further, the dimension underlying strength of preference remains unclear in economics, with candidates including payoff-irrelevant numerical magnitudes. We provide a systematic, out-of-sample empirical validation of these relations (both for choices and response times) relying on both a new experimental design and simulations.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:D01, D81, D91
Uncontrolled Keywords:Stochastic choice, strength of preference, decision errors, risk attitude, Entscheidungsfindung, Skalierung, Risikoverhalten, Nutzenfunktion
Language:English
Date:February 2022
Deposited On:29 Jul 2019 15:29
Last Modified:04 Mar 2022 08:52
Series Name:Working paper series / Department of Economics
Number of Pages:26
ISSN:1664-705X
Additional Information:Revised version ; Former title: Strength of preference and decision making under risk
OA Status:Green
Official URL:http://www.econ.uzh.ch/static/wp/econwp330.pdf
Related URLs:https://www.econ.uzh.ch/en/research/workingpapers.html

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