Stochastic choice, systematic mistakes and preference estimation
Yves Breitmoser ()
MPRA Paper from University Library of Munich, Germany
Individual choice exhibits "presentation effects" such as default, ordering and round-number effects. Using existing models, presentation effects bias utility estimates, which suggests instability of preferences and obscures behavioral patterns. This paper derives a generalized model of stochastic choice by weakening logit's axiomatic foundation. Weakening the axioms implies that focality of options is choice-relevant, alongside utility, which entails presentation effects. The model is tested on four well-known studies of dictator games exhibiting typical round-number patterns. The generalized logit model captures the choice patterns reliably, substantially better than existing models: it robustly predicts and controls for the round-number effects, thus provides "clean" utility estimates that are stable and predictive across experiments.
Keywords: stochastic choice; systematic mistakes; axiomatic foundation; utility estimation; dictator game (search for similar items in EconPapers)
JEL-codes: C10 C90 D03 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-dcm, nep-evo, nep-hpe, nep-ore and nep-upt
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:72779
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