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Re-examining coherent arbitrariness for the evaluation of common goods and simple lotteries

Drew Fudenberg, David Levine () and Zacharias Maniadis

No 34, Working Papers from "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi

Abstract: The assumption that people make decisions based on a constant set of preferences, so that choices should not depend on context-specific cues (anchors), is one of the cornerstones of economic theory. We reexamined the effects of an anchoring manipulation on the valuation of common market goods that was introduced in Ariely, Lowenstein and Prelec (2003). We found much weaker anchoring effects. We performed the same manipulation on the evaluation of binary lotteries, and we found no anchoring effects. This suggests limits on the robustness of strong anchoring effects. Hence, the evidence that people have "arbitrary preferences" may not be conclusive, and economic theory may still be valid in many cases of interest.

Keywords: preferences; anchoring; willingness to pay; Becker-DeGroot-Marschak mechanism (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-hpe
Date: 2010-11
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