Measuring Economic Preferences in the Presence of Noise: The Connections Between Choices and Valuations

Ted O'Donoghue, Charles Sprenger, Po Hyun Sung and Ben Wincelberg

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Abstract: Past research highlights failures of "procedural invariance" when measuring economic preferences using choices versus valuations. We reassess these failures by examining theoretical connections between choices and valuations when preferences are stable but measurements are noisy and individuals are heterogeneous. Even under strong assumptions governing noise and heterogeneity, stability does not generally imply identical measurements. We develop new tests of stable preferences in conjunction with various ancillary assumptions about heterogeneity and noise. We implement these tests using existing data to understand if, in the domain of risk preferences, choices and valuations truly differ and to provide quantitative assessments of any deviations. Limiting to the types of data used in the prior literature, we rarely reject the null of stable preferences. With richer data linking individual choices and valuations and structural assumptions, we find evidence of instability which differs qualitatively from the received wisdom that choices implicate greater risk aversion than valuations.

Date: 2026-09
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