Preference Flashcards
What’s the discovered preference hypothesis?
The standard economic model is a good predictor if people have had the opportunity to learn from experience
Why is discovered preference hypothesis not always feasible?
When people do things they only do a few times in their life (Buying a house etc)
What is a preference reversal?
When someone puts a higher price on one bet/prospect, but chooses the opposite one
What’s preference transitivity?
If someone prefers X to Y and Y to Z, then they prefer X to Z
What’s the editing phase?
Reorganisation and reformulation of prospects to make them easier to understand
What is scale compatibility?
When the importance of one aspect of an option is enhanced by the compatibility with he decision a person is asked to make
In regret theory, what is the function R(X,Y)?
It represents the regret/rejoice that someone gets from payoff x compared to if they’d gotten payoff Y from another prospect
A prospect is preffered if the expected rejoice exceeds:
The expected regret
What can cause a preference reversal?
- Wanting something, but being enticed by the packaging of a competitor
- Context may cause it (E.g. due to a surprise)
What is revealed preference?`
When someone’s actions reveal their preferences
