Misconceptions and Game Form Recognition: Challenges to Theories of Revealed Preference and Framing
Timothy N. Cason
Purdue University - Krannert School of Management
Charles R. Plott
California Institute of Technology - Division of the Humanities and Social Sciences
August 18, 2014
California Institute of Technology Social Science Working Paper No. 1364
This study explores the tension between the standard economic theory of preference and non-standard theories of preference that are motivated by an underlying theory of framing. A simple experiment was performed to measure a known preference, the value of a card that can be exchanged for $2 cash. The measurement does not produce the known preference and instead reports a preference that has properties often cited in support of non-standard preference theories and framing. Close examination reveals that the divergence of the measured preference from the known preference reflects a mistake, arising from some subjects’ misconception of the game form. We conclude that choice data should not be granted an unqualified interpretation of preference revelation. Mistakes in choices obscured by a possible error at the foundations of the theory of framing, can masquerade as having been produced by non-standard preferences.
Number of Pages in PDF File: 41
Keywords: Preference Elicitation, Misconceptions, Reference Dependence, Endowment Effect
JEL Classification: C8, C9
Date posted: September 25, 2012 ; Last revised: August 20, 2014
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