Estimating preference parameters in individual financial decision-making

This thesis deals with individual financial decision making, that is the process of choosing a preferred option from among a set of alternatives. Individual behavior has been traditionally studied in economics by means of the rational-choice model, which assumes that agents maximize some objective function under the constraints they face in pursuit of their self-interest. This model is based on assumptions that are convenient for many purposes, but such that they may not always fit empirically many situations of economic choice. A growing number of economists have become aware of the fact that in order to make their models more relevant and realistic they must take into account (and borrow) insights and methodologies from different research fields, namely psychology and other social sciences. This is the subject of the theory of bounded rationality and the research interest of behavioral economics. The analysis of concepts such as risk attitude, intertemporal choice, time preference and habit formation is here implemented according to a positive approach, based on empirical observation and on experimental studies of choice behavior. The estimation of (some of) the parameters governing people's preferences provides additional findings in a large body of literature where there is still room for debate about how agents make their choices in reality. In most of the empirical findings reported in this thesis the predictions from the rational-choice model are confirmed by the data. However, we also find that in some case actual behavior departs (at least partially) from such predictions, so that bounded rationality seem to provide a better explanation for actual individual decision making: whenever people's choices deviate from the assumptions of the rational theory, economic research in decision making needs to borrow from other disciplines concepts that account for empirical counterintuitive findings.