(Non-)Parametric Recoverability of Preferences and Choice Prediction

Review of Economics and Statistics ◽

10.1162/rest_a_01143 ◽

2021 ◽

pp. 1-45

Author(s):

Lanny Zrill

Keyword(s):

Decision Making ◽

Experimental Design ◽

Upper Bound ◽

Parametric Model ◽

Economic Research ◽

Decision Making Under Risk ◽

Predictive Success ◽

Functional Forms ◽

Adaptive Experimental Design ◽

Non Parametric

Abstract Simple functional forms for utility require restrictive structural assumptions that are often contrary to observed behavior. Even so, they are widely used in applied economic research. I address this issue using a two-part adaptive experimental design to compare the predictions of a popular parametric model of decision making under risk to those of non-parametric bounds on indifference curves. Interpreting the latter as an approximate upper bound, I find the parametric model sacrifices very little in terms of predictive success. This suggests that, despite their restrictiveness, simple functional forms may nevertheless be useful representations of preferences over risky alternatives.

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The Effects of a Shared Interest and Regret Salience on Tax Evasion

Journal of the American Taxation Association ◽

10.2308/atax-51196 ◽

2015 ◽

Vol 37 (2) ◽

pp. 109-135 ◽

Cited By ~ 8

Author(s):

William Douglas Brink ◽

Richard A. White

Keyword(s):

Decision Making ◽

Experimental Design ◽

Decision Maker ◽

Tax Evasion ◽

Ethical Decision ◽

Ethical Decision Making ◽

Decision Making Under Risk ◽

Shared Interest ◽

Tax Savings ◽

Evasion Behavior

ABSTRACTThis study examines whether sharing the potential tax savings and the risk of penalties associated with tax evasion with another individual affects a decision maker's willingness to evade taxes. This study also explores whether increasing the salience of potential regret from an adverse audit decreases tax evasion behavior. Using a 2 × 2 experimental design with experienced taxpayers as participants, this study finds that participants are less willing to evade taxes when they share the potential tax savings and risk of penalties with another taxpayer compared to when the reporting decision affects solely the decision maker. Supplemental analysis shows that participants feel that tax evasion is more unethical when a shared interest is present. In addition, this study demonstrates that increasing regret salience from an adverse audit decreases participants' willingness to evade taxes. This study contributes to multiple literature streams, including taxpayer compliance, ethical decision making, and decision making under risk.

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Does choice change preferences? An incentivized test of the mere choice effect

Experimental Economics ◽

10.1007/s10683-021-09728-5 ◽

2021 ◽

Author(s):

Carlos Alós-Ferrer ◽

Georg D. Granic

Keyword(s):

Decision Making ◽

Experimental Design ◽

Social Welfare ◽

Conventional Wisdom ◽

Choice Data ◽

Online Experiment ◽

Decision Making Under Risk ◽

Demand Functions

AbstractWidespread evidence from psychology and neuroscience documents that previous choices unconditionally increase the later desirability of chosen objects, even if those choices were uninformative. This is problematic for economists who use choice data to estimate latent preferences, demand functions, and social welfare. The evidence on this mere choice effect, however, exhibits serious shortcomings which prevent evaluating its possible relevance for economics. In this paper, we present a novel, parsimonious experimental design to test for the economic validity of the mere choice effect addressing these shortcomings. Our design uses well-defined, monetary lotteries, all decisions are incentivized, and we effectively randomize participants’ initial choices without relying on deception. Results from a large, pre-registered online experiment find no support for the mere choice effect. Our results challenge conventional wisdom outside economics. The mere choice effect does not seem to be a concern for economics, at least in the domain of decision making under risk.

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