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Axiom Preferences and Choice Mistakes under Risk

Author

Listed:
  • Fabian Herweg
  • Svenja Hippel
  • Daniel Müller
  • Fabio Römeis

Abstract

We investigate whether violations of canonical axioms of choice under risk are mistakes or a manifestation of true preferences. First, we elicit axiom and gamble preferences and then allow subjects to revise their potentially conflicting preferences. Among the behavioral patterns that allow for a clear-cut interpretation on the decision level, we find that roughly 70% of axiom viola-tions are intentional whereas only 30% are mistakes. On the subject level we can clearly categorize almost half of our subjects. Among those, roughly 24%are rational expected utility maximizers, 24% make occasional mistakes, and 52% refute the normative value of these axioms.

Suggested Citation

  • Fabian Herweg & Svenja Hippel & Daniel Müller & Fabio Römeis, 2024. "Axiom Preferences and Choice Mistakes under Risk," CESifo Working Paper Series 11166, CESifo.
    • Handle: RePEc:ces:ceswps:_11166
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    References listed on IDEAS

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    More about this item

    Keywords

    axiomatic rationality; choice under risk; context-dependent preferences; mistakes; regret theory;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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