Preference Identi?cation Under Inconsistent Choice

About this event

Behavioral economics has documented numerous settings in which behavior varies according to seemingly arbitrary features of the decision-making environment such as which option is the default, the order in which options are presented, or which features of the options are salient. Optimal policy design requires accounting for the preferences of decision-makers whose choices are sensitive to such factors, but traditional revealed preference analysis breaks down in that setting. We consider binary choice problems in which preference-irrelevant 'frames' affect the behavior decision-makers in monotonic directions and develop an empirical framework for identifying decision-makers' ordinal preferences. Preference identification in such settings hinges upon understanding the empirical relationship between decision-makers’ preferences and their propensity to choose consistently. As such, familiar insights from the program evaluation literature can be fruitfully adapted to this new setting. We take these techniques to data to shed new light on the optimality of automatic enrollment in savings plans, preferences for online privacy, and the analysis of question-order and answer-order effecs in surveys.