Chapter 3: Psychological research and theories on preferential choice
Understanding human preferential choice behavior is challenging because humans change their preferences across time and contexts. This chapter summarizes the basic behavioral findings from research on human preferential choice and reviews the psychological theories that have been proposed to account for the puzzling findings. The main theme that we attempt to convey to the reader is that a coherent view of an individual’s underlying beliefs and values can only be recovered by carefully modeling the dynamic nature of the choice process through which these beliefs and values operate to produce observed behavior. When examining people’s choice behavior it becomes apparent that it varies substantially. For instance, Hey (2001) conducted a study in which 53 people repeatedly choose between pairs of simple gambles in five different sessions. In every session the same set of 100 pairs was presented. When assuming stable and deterministic preferences all people should have made identical choices in every session. However, it turned out that no single person always made the same choices across all five sessions. Instead, on average participants changed their preferences for 10 percent of pairs between two consecutive sessions; for on average 23 percent of the pairs they did not make identical choices in all five sessions. The seminal work by Mosteller and Nogee (1951) discovered early on that people’s choice behavior varies and has a probabilistic character. More surprisingly, its consequences for theory-building are still not fully acknowledged.
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