Misconceptions and Game Form Recognition: Challenges to Theories of Revealed Preference and Framing
California Institute of Technology Social Science Working Paper No. 1364
41 Pages Posted: 25 Sep 2012 Last revised: 20 Aug 2014
Date Written: August 18, 2014
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.
Keywords: Preference Elicitation, Misconceptions, Reference Dependence, Endowment Effect
JEL Classification: C8, C9
Suggested Citation: Suggested Citation