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Misconceptions and Game Form Recognition of the BDM Method: Challenges to Theories of Revealed Preference and Framing

Cason, Timothy N. and Plott, Charles R. (2014) Misconceptions and Game Form Recognition of the BDM Method: Challenges to Theories of Revealed Preference and Framing. Social Science Working Paper, 1364. California Institute of Technology , Pasadena, CA. http://resolver.caltech.edu/CaltechAUTHORS:20140403-155709665

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Abstract

This study explores the tension between the standard economic theory of preference and non-standard theories of preference that are motivated by an underlying theory of framing. A simple experiment was performed to measure a known preference, the value of a card that can be exchanged for $2 cash. The measurement does not produce the known preference and instead reports a preference that has properties often cited in support of non-standard preference theories and framing. Close examination reveals that the divergence of the measured preference from the known preference reflects a mistake, arising from some subjects’ misconception of the game form. We conclude that choice data should not be granted an unqualified interpretation of preference revelation. Mistakes in choices obscured by a possible error at the foundations of the theory of framing, can masquerade as having been produced by non-standard preferences.


Item Type:Report or Paper (Working Paper)
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URLURL TypeDescription
http://resolver.caltech.edu/CaltechAUTHORS:20131210-141208524Related ItemPublished version of this SSWP
Additional Information:Original Sept. 2012; Revised Nov. 2013 For helpful comments we thank three anonymous referees, Peter Bossaerts, Gary Charness, James Cox, Vincent Crawford, Dirk Englemann, David Grether, Ori Heffetz, David Levine, Vai-Lam Mui, Rosemarie Nagel, Anmol Ratan, Aldo Rustichini, Matthew Shum, Charles Sprenger, Kathryn Zeiler, and presentation audiences at UC Santa Barbara, USC, Purdue, Stanford, Monash, and ESA and SAET conferences. We retain responsibility for our interpretation and for any mistakes or misconceptions.
Group:Social Science Working Papers
Subject Keywords:Preference Elicitation; Misconceptions; Reference Dependence; Endowment Effect
Classification Code:JEL C08, C09
Record Number:CaltechAUTHORS:20140403-155709665
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20140403-155709665
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:44650
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:24 Apr 2014 23:50
Last Modified:11 Aug 2017 19:00

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