Revealed preferences under uncertainty: Incomplete preferences and preferences for randomization

Elena Cettolin, Arno Riedl

Research output: Contribution to journalArticleScientificpeer-review

Abstract

The completeness axiom of choice has been questioned for long and theoretical models of decision making allowing for incomplete preferences have been developed. So far the theoretical accomplishments have not been paired with empirical evidence on the actual existence of incomplete preferences under uncertainty. We provide empirical evidence in support of the existence of incomplete preferences due to multiple priors over an ambiguous event, i.e.
Bewley preferences. We design experimental decision tasks where specific choice patterns are consistent with Bewley preferences but inconsistent with models assuming completeness. We find that approximately half of the subjects behave consistent with variational Bewley preferences and that the observed behavioral pattern cannot be attributed to probability weighting, choice mistakes, or intransitive indifference. In a robustness test we show that the
observed behavior is robust to a prize variation in the ambiguous prospect and consistent with comparative statics predictions based on variational Bewley preferences.
Original languageEnglish
Pages (from-to)547-585
JournalJournal of Economic Theory
Volume181
DOIs
Publication statusPublished - May 2019

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Incomplete preferences
Uncertainty
Revealed preference
Randomization
Completeness
Empirical evidence
Indifference
Prediction
Robustness test
Experimental design
Comparative statics
Decision making
Probability weighting
Axiom
Multiple priors

Keywords

  • incomplete preferences
  • uncertainty
  • multiple priors
  • experiment

Cite this

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Revealed preferences under uncertainty : Incomplete preferences and preferences for randomization. / Cettolin, Elena; Riedl, Arno.

In: Journal of Economic Theory, Vol. 181, 05.2019, p. 547-585.

Research output: Contribution to journalArticleScientificpeer-review

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