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

Timothy N. Cason

Purdue University - Krannert School of Management

Charles R. Plott

California Institute of Technology - Division of the Humanities and Social Sciences

Date Written: August 18, 2014

Abstract

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.
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Keywords: Preference Elicitation, Misconceptions, Reference Dependence, Endowment Effect

JEL Classification: C8, C9

Suggested Citation

Cason, Timothy N. and Plott, Charles R., Misconceptions and Game Form Recognition: Challenges to Theories of Revealed Preference and Framing (August 18, 2014). California Institute of Technology Social Science Working Paper No. 1364. Available at SSRN: https://ssrn.com/abstract=2151661 or http://dx.doi.org/10.2139/ssrn.2151661

Timothy N. Cason

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-494-1737 (Phone)

Charles R. Plott (Contact Author)

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
337 Baxter Hall
Pasadena, CA 91125
United States
626-395-4209 (Phone)

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