A Theory of Chosen Preferences

Abstract

We propose and develop a dynamic theory of endogenous preference formation in which people adopt worldviews that shape their judgments about their experiences. The framework highlights the role of mindset flexibility, a trait that determines the relative weights the decision maker places on her current and anticipated worldviews when evaluating future outcomes. The theory generates rich behavioral dynamics, thereby illuminating a wide range of applications and providing potential explanations for a variety of observed phenomena.

Keywords: chosen preferences, endogenous preferences, time inconsistency, mindset flexibility

JEL Classification: D11, D90, D91