New Measures of Preferences: Risk, Time, Beliefs, and Social Image

University Of California-San Diego, La Jolla CA

Investigators

Abstract

This project explores four areas of individual decision making: choices over risk, choices over time, reporting beliefs about probability distributions, and concern for one 's social-image. The four sections are tied together by constructing new ways to measure and estimate preferences. With risk, we ask subjects to construct a most preferred gamble by trading away some probability of winning for an increase in the prize. For choices over time, we vary the returns, time delays, and likelihood of getting paid and ask individuals to diversify across receiving payment "earlier" or "later." For eliciting beliefs, we employ a new scoring rule that is simple and transparent and tends to result in more updating behavior. Finally, with social image we intend to show that when a person's choices may have some moral consequences, an essential feature of the deliberations is the image created in the minds of others. All of these issues are addressed with new and simple techniques that tend to produce data that is more in line with neoclassical models of choice than many other techniques employed by economists and decision scientists in the past. In summary, the projects presents a new methodology for measuring the foundations of economics analysis: preferences and beliefs. In the process we gain a deeper understanding of how the mind approaches complex individual and social decisions. This research will provide economists and decision theorists with new instruments that will improve the reliability and accuracy of their work. Policy makers will have new information to use in evaluating programs that affect time and risk. Institution and mechanism designers will have a deeper understanding of how to incorporate and use social motives to improve performance and efficiency.