Common ratio and common consequence effects arise from true preferences

Carlos Alós-Ferrer, Ernst Fehr, Helga Fehr-Duda and Michele Garagnani

No 459, ECON - Working Papers from Department of Economics - University of Zurich

Abstract: Recent contributions suggest that the empirical evidence for the common ratio effect could be explained as noise instead of underlying preferences under “common assumptions.” We revisit this argument using a more general method which allows to unambiguously dis- tinguish noise from preferences nonparametrically and with less stringent assumptions. The results are independent of the assumed behavioral model or how noise affects choices. Ap- plying this method to new experimental data we show that there is a systematic preference for the common ratio and the common consequence effects which cannot be explained by noise.

JEL-codes: C91 D81 D91 (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-cbe, nep-dcm, nep-exp and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:zur:econwp:459

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