Joachim Vosgerau and Eyal Peer, “Extreme Malleability of Preferences: Absolute Preference Sign Changes Under Uncertainty.” Journal of Behavioral Decision Making 32(1): 38-46, January 2019.
• The evidence on the extent to which preferences are constructed as opposed to revealed has been challenged. Much of the evidence is based on a person preferring option A to option B in one condition, and then, preferring option B to option A in a somewhat different condition -- where the conditions differ only with respect to supposedly irrelevant factors.
• The best evidence of preference malleability would be where a person evaluates the same prospect (just A, no B) in opposite directions – is it a good or a bad, is it desirable or undesirable? – in different conditions.
• The authors conduct two experiments (the second experiment is a near replication of the first with a larger sample size and some other improvements) where subjects indicate whether they have to be paid to accept a prospect (it’s bad), and also whether they would pay for the opportunity to obtain the same prospect (it’s good). If they are both willing to pay and need to be paid for the prospect, then it seems that their preferences are quite malleable.
• One lottery: you win 30 NIS (Israeli New Shekels) if heads and lose 20 NIS if tails; second lottery: you win 30 NIS if a die toss brings an odd number and lose 20 NIS if the toss yields an even number. These lotteries are thus identical in terms of payoffs and probabilities.
• The experimenters ask how much subjects would need to be paid (“compensation amount”) for one of the lotteries and how much they would be willing to pay for the other lottery.
• Most people are willing-to-pay, and even more people demand compensation -- but about half (experiment 1) or about 84% (experiment 2) do both. People do not seem to know whether the lottery is desirable or undesirable or both: they do not seem to possess some underlying, stable preference concerning this lottery.
• In experiment 1, the more people were willing to pay for the lottery, the more they also required to be compensated to receive the lottery.
• The experimental design also allows some inferences to be made concerning risk preferences; for instance, if your willingness-to-pay for a lottery is less than the lottery's expected value, that is evidence that you are risk averse. Risk preferences, too, are not clear or stable: about 34% of the participants in experiment 1 (and 61%+ in experiment 2) indicate that they are both risk averse and risk seeking/neutral!
• The evidence on the extent to which preferences are constructed as opposed to revealed has been challenged. Much of the evidence is based on a person preferring option A to option B in one condition, and then, preferring option B to option A in a somewhat different condition -- where the conditions differ only with respect to supposedly irrelevant factors.
• The best evidence of preference malleability would be where a person evaluates the same prospect (just A, no B) in opposite directions – is it a good or a bad, is it desirable or undesirable? – in different conditions.
• The authors conduct two experiments (the second experiment is a near replication of the first with a larger sample size and some other improvements) where subjects indicate whether they have to be paid to accept a prospect (it’s bad), and also whether they would pay for the opportunity to obtain the same prospect (it’s good). If they are both willing to pay and need to be paid for the prospect, then it seems that their preferences are quite malleable.
• One lottery: you win 30 NIS (Israeli New Shekels) if heads and lose 20 NIS if tails; second lottery: you win 30 NIS if a die toss brings an odd number and lose 20 NIS if the toss yields an even number. These lotteries are thus identical in terms of payoffs and probabilities.
• The experimenters ask how much subjects would need to be paid (“compensation amount”) for one of the lotteries and how much they would be willing to pay for the other lottery.
• Most people are willing-to-pay, and even more people demand compensation -- but about half (experiment 1) or about 84% (experiment 2) do both. People do not seem to know whether the lottery is desirable or undesirable or both: they do not seem to possess some underlying, stable preference concerning this lottery.
• In experiment 1, the more people were willing to pay for the lottery, the more they also required to be compensated to receive the lottery.
• The experimental design also allows some inferences to be made concerning risk preferences; for instance, if your willingness-to-pay for a lottery is less than the lottery's expected value, that is evidence that you are risk averse. Risk preferences, too, are not clear or stable: about 34% of the participants in experiment 1 (and 61%+ in experiment 2) indicate that they are both risk averse and risk seeking/neutral!
No comments:
Post a Comment