Abstract
Widespread evidence from psychology and neuroscience documents that previous choices unconditionally increase the later desirability of chosen objects, even if those choices were uninformative. This is problematic for economists who use choice data to estimate latent preferences, demand functions, and social welfare. The evidence on this mere choice effect, however, exhibits serious shortcomings which prevent evaluating its possible relevance for economics. In this paper, we present a novel, parsimonious experimental design to test for the economic validity of the mere choice effect addressing these shortcomings. Our design uses well-defined, monetary lotteries, all decisions are incentivized, and we effectively randomize participants’ initial choices without relying on deception. Results from a large, pre-registered online experiment find no support for the mere choice effect. Our results challenge conventional wisdom outside economics. The mere choice effect does not seem to be a concern for economics, at least in the domain of decision making under risk.
Highlights
The ability to recover preferences from choice data, and subsequently predict choices from preferences, is fundamental for economic analysis
We develop a parsimonious experimental design that allows researchers to isolate the effect of mere, uninformative choices on future choices in an economically-relevant domain
Parsimonious experimental design, we have presented the first conclusive evidence on the economic validity of the mere-choice-induced preference change phenomenon
Summary
The ability to recover preferences from choice data, and subsequently predict choices from preferences, is fundamental for economic analysis. The revealed preference approach (Samuelson, 1938, 1948; Houthakker, 1950; Arrow, 1959; Richter, 1966) essentially views preferences as nothing more than organizing schemes reflecting both observed and predicted choices. Provided that stable mechanisms govern choice variability, true preferences can still be recovered (e.g., Apesteguía and Ballester, 2018; Lu and Saito, 2020; Frick et al, 2019; Alós-Ferrer et al, 2021). Predicting future choices from preferences which themselves are estimated from past choices is only warranted as long as economic agents display well-defined and stable choice patterns (or, at least, stable mechanisms governing choice variability) in the relevant time frame
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