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Hypothetical Expected Utility

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  • Evan Piermont

Abstract

This paper provides a model to analyze and identify a decision maker's (DM's) hypothetical reasoning. Using this model, I show that a DM's propensity to engage in hypothetical thinking is captured exactly by her ability to recognize implications (i.e., to identify that one hypothesis implies another) and that this later relation is encoded by a DM's observable behavior. Thus, this characterization both provides a concrete definition of (flawed) hypothetical reasoning and, importantly, yields a methodology to identify these judgments from standard economic data.

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  • Evan Piermont, 2021. "Hypothetical Expected Utility," Papers 2106.15979, arXiv.org, revised Jul 2021.
    • Handle: RePEc:arx:papers:2106.15979
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    References listed on IDEAS

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    Cited by:

    1. Niederle, Muriel & Vespa, Emanuel, 2023. "Cognitive Limitations: Failures of Contingent Thinking," University of California at San Diego, Economics Working Paper Series qt5q14p1np, Department of Economics, UC San Diego.

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