CONSTRUCTION OF PREFERENCES

GHIURCĂ Camelia , Alexandru Ioan Cuza University of Iași

Abstract:
Standard economic theory suggests that people’s preferences are revealed by their behavior. However, behavioral economics states that often preferences are constructed mainly because of the limited rationality people have. This paper illustrates the behavioral theory of decision making focusing on judgement under certainty and decision-making under uncertainty. The existence of the phenomenon of preference reversal together with mental accounting and the other four effects – endowment, anchoring, decoy and framing - presented above suggests the discrepancy between the standard model of choice under certainty and what usually happens in practice and certified the fact that in real world preferences are not revealed, but constructed.

Keywords: Behavioural Economics, Preference Construction, Preference Reversal, Framing Effects, Mental Accounting.

JEL Classification: B2, B21, D90

Volume: 72, Issue: 1

Pages: 65 - 75

Publication date: April, 2020

Download the article: http://economice.ulbsibiu.ro/revista.economica/archive/72107ghiurca.pdf

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