Preference Cloud Theory: Imprecise Preferences and Preference Reversals

Oben Bayrak () and John Hey

No 2015:9, CERE Working Papers from CERE - the Center for Environmental and Resource Economics

Abstract: This paper presents a new theory, called Preference Cloud Theory, of decision-making under uncertainty. This new theory provides an explanation for empirically-observed Preference reversals. Central to the theory is the incorporation of preference imprecision which arises because of individuals’ vague understanding of numerical probabilities. We combine this concept with the use of the Alpha model (which builds on Hurwicz’s criterion) and construct a simple model which helps us to understand various anomalies discovered in the experimental economics literature that standard models cannot explain.

Keywords: Imprecise Preferences; Preference Reversals; Decision under Uncertainty; Anomalies in Expected Utility Theory (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2015-09-08
New Economics Papers: this item is included in nep-cbe, nep-hpe, nep-mic and nep-upt
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Citations: View citations in EconPapers (1)

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Working Paper: Preference Cloud Theory: Imprecise Preferences and Preference Reversals (2015)
Working Paper: Preference Cloud Theory: Imprecise Preferences and Preference Reversals (2015)
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