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Preference Cloud Theory: Imprecise Preferences and Preference Reversals

Oben Bayrak () and John Hey ()

2015 Papers from Job Market Papers

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 individualsâ vague understanding of numerical probabilities. We combine this concept with the use of the Alpha model (which builds on Hurwiczâs criterion) and construct a simple model which helps us to understand various anomalies discovered in the experimental economics literature that standard models cannot explain.

JEL-codes: D81 (search for similar items in EconPapers)
Date: 2015-07-20
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-hpe, nep-mic and nep-upt
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