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Learning own preferences through consumption

Marek Kapera

No 2022-074, Working Papers from Warsaw School of Economics, Collegium of Economic Analysis

Abstract: This paper provides theoretical foundations for preference discovery theory. We propose to relax the assumption that the consumer has perfect knowledge of their own preferences, so that the consumer knows only the subjective probability of those alternatives being in any given relation, which is conditional on the information available to the consumer. To achieve that, we construct probabilistic measures on the space of all permissible preference relations and consider the consumer to be equipped with one such measure, instead of a preference relation. These measures are intrinsically linked by construction to the information structure available to the consumer and allow for indirect learning. We visualize how these measures correspond to the choices of the consumer, we consider three distinct decision procedures. These procedures formalize how under different assumptions regarding the underlying probability measure, the consumer guesses their own tastes. Finally, we use these measures to define the value of the information provided by the consumption of a chosen alternative and study the properties of the preference ranking induced by it.

Keywords: Taste uncertainty; Preference discovery; Learning through consumption; Conditional preferences; Experimental preferences (search for similar items in EconPapers)
JEL-codes: D11 D83 D91 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2022-04
New Economics Papers: this item is included in nep-dcm, nep-mic and nep-upt
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