Identifying Belief-dependent Preferences

Enrico Mattia Salonia ()
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Enrico Mattia Salonia: Toulouse School of Economics

No 599, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: Why are investors overconfident and trade excessively? Why do patients at health risk avoid testing? Why are voters polarised? Possibly because their beliefs directly influence their well-being, i.e., they have belief-dependent preferences. However, existing theories of belief-dependent preferences struggle to generate testable predictions or to identify simultaneously beliefs and preferences. This paper addresses these issues by providing an axiomatic characterization of a class of preferences and belief-updating rules that deviate from Bayesian updating. Preferences, beliefs, and updating rules are identified from choices over contingent menus, each entailing a menu of acts available at a later time contingent on an uncertain state of the world. The results provide a theory-based approach to experimental designs to test information avoidance, distortion, and other behaviours consistent with beliefdependent preferences.

Keywords: Belief-dependent preferences; Non-Bayesian updating; Information avoidance; Belief distortion; Contingent menus (search for similar items in EconPapers)
JEL-codes: D03 D81 D83 D91 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2025-05-27, Revised 2025-05-27
New Economics Papers: this item is included in nep-dcm, nep-exp, nep-hea and nep-mic
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