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Re-examining coherent arbitrariness for the evaluation of common goods and simple lotteries

Working paper n°: 34

Author(s): Drew Fudenberg, David K. Levine, Zacharias Maniadis

Year: 2010

The assumption that people make decisions based on a constant set of preferences, so that choices should not depend on context-specific cues (anchors), is one of the cornerstones of economic theory. We reexamined the effects of an anchoring manipulation on the valuation of common market goods that was introduced in Ariely, Lowenstein and Prelec (2003). We found much weaker anchoring effects. We performed the same manipulation on the evaluation of binary lotteries, and we found no anchoring effects. This suggests limits on the robustness of strong anchoring effects. Hence, the evidence that people have arbitrary preferences may not be conclusive, and economic theory may still be valid in many cases of interest.


Drew Fudenberg

Harvard University, Department of Economics

 

David K. Levine

Washington University St. Louis, Department of Economics

 

Zacharias Maniadis

Universita Bocconi, Dondena Centre for Reserach on Social Dynamics

 

 

 

Keywords: preferences, anchoring, willingness to pay, Becker-DeGroot-Marschak mechanism

 

Download: The paper may be downloaded here.

Last updated 16 July 2015 - 16:34:15