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date: 26 January 2020

Abstract and Keywords

A discrepancy between standard economic assumptions and observed behavior centers around individual preferences, which are assumed to be well ordered and consistent, but descriptively shown to be inconsistent and malleable. Not having at their disposal a reliable procedure for assigning values to options, people construct their preferences in the context of decision. As a result, the attractiveness of options depends on, among other things, the nature of other options in the set, the procedure used to express preference, the context of evaluation, and the decision-maker’s self-conception. The varieties of psychological experience underlying preference inconsistency are reviewed, and their implications are discussed. Preference inconsistency, it is proposed, is the outcome not of distracted shortcuts or avoidable errors, but of fundamental aspects of mental life that are central to how people process information. Although people endorse basic consistency criteria, their preferences are inherently inconsistent, with important implications for policy and welfare.

Keywords: preference inconsistency, rationality, framing, prospect theory, decision conflict, decision weights, separate versus comparative evaluation, multiple selves

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