The Mind Under the Axioms: Decision-Theory Beyond Revealed Preferences

Description

The Mind under the Axioms reviews two basic ingredients of our understanding of human decisions – conative aspects (preferences) and cognitive aspects (beliefs). These ingredients are axiomatized in modern decision theory in the view to obtain a formally and empirically tractable representation of the decision-maker. The main issue developed in this book is the connection between realistic and testable psychological features and the descriptive component of abstract axioms of rationality. It addresses three main topics for which the interaction between axiomatization and psychology leads to potential new developments in experimental decision-theory and puts strictures on the standard revealed preference methodology prevailing in that field. The possibility of a cardinal representation of preferences is discussed. Different ways of accounting for incomplete preferences, and in which sense, are analysed. Finally, the conditions of separability between preferences and beliefs, such as prescribed by axioms of state-independence, are submitted to actual and potential tests. The book offers a bridge between the disciplines of decision-theory, psychology, and neuroeconomics. It is thus relevant for those, in psychology and cognitive sciences, who are sometimes put off by the high degree of formalism and abstraction in decision-theory, that seems to lie beyond the reach of psychological realism. It also aims to convince those in decision-theory for whom psychological realism and empirical testability should not constrain the modelling enterprise that conceptual clarification can come from attempted experimentation. Addresses open and evolving theoretical issues in decision-theory, especially from experimental perspectivesHelps researchers understand the psychological and neuroscientific mechanisms for decision-makingConsiders how preferences shape beliefs and how beliefs shape preferencesUncovers the very formal and abstract psychological and behavioral implications that are actually made in contemporary decision-theory Cover The Mind Under the Axioms: Decision-Theory Beyond Revealed Preferences Copyright Dedication Introduction I.1 Axioms are not mindless I.2 The limits of the behavioral turn in decision-theory I.3 Working in the margins of the revealed preference paradigm I.4 How to read and use this book References 1 Cardinalism 1.1 The need for cardinal utility 1.1.1 Cardinalism and subjectivity 1.1.2 Allais’s cardinalism 1.1.3 Alternative hedonimetry 1.2 Utility functions as psychologies 1.2.1 Utility functions as primitives 1.2.2 Features of utility between ordinality and cardinality 1.2.3 The problem of loss-aversion 1.2.4 Standard neuroeconomics of utility functions 1.3 Informational and representational constraints 1.3.1 The informational basis of cardinal utility 1.3.2 Köbberling’s general result 1.3.3 Dispensing with representation theorems? 1.4 To the lab 1.4.1 Eyetracking rank-dependent utility 1.4.2 Does the lack of episodic experience lead to von Neumann-Morgenstern rationality? References Further reading 2 Incompleteness 2.1 Sources of incompleteness 2.1.1 Structural and cognitive sources of incompleteness 2.1.2 Incomparability and incommensurability 2.1.3 Preference for flexibility and incomplete preferences 2.1.4 Uncertainty and confidence about one’s preferences 2.1.5 On nudging incomplete preferences 2.2 Motives and models of incomplete preferences 2.2.1 Representing incompleteness by multiple-utility functions 2.2.2 Axiomatic interactions due to incompleteness 2.2.3 Status-quo bias and incomplete preferences 2.3 Incomplete preferences and incomplete beliefs 2.3.1 Bewley’s model 2.3.2 Symmetry between incomplete beliefs and incomplete preferences 2.3.3 Multiple-priors models and internal dialogs 2.4 Revealing incompleteness versus indifference 2.4.1 Choice-theoretic foundations of incomplete preferences 2.4.2 A revelation procedure of incompleteness versus indifference by means of choice-deferral 2.5 To the lab: temporal behavior of incomplete preferences 2.5.1 Measuring the degree of incompleteness through probabilistic deferral 2.5.2 Reaction times, indifference, and indecisiveness 2.5.3 Confidence and comparisons: what is inherited from tastes to preferences References Further reading 3 State-dependence 3.1 P3 and P4 3.1.1 Violations or intuitive pervasive behavior? 3.1.2 P3/P4 asymmetry and complementarity 3.1.3 Is state-dependence a remediable phenomenon? 3.2 What is a state-space good for? 3.2.1 Ontological fuzziness and common sense 3.2.2 States between pragmatics and metaphysics 3.2.3 Are states unambiguous observations? 3.2.4 Nonprimitive states 3.3 Hypothetical preferences 3.3.1 Modeling the basic intuitions of state-dependence 3.3.2 The representation of state-dependent preferences problem 3.3.3 The combination of local and global state-dependent preferences 3.3.4 The induced limits for the revealed preference paradigm 3.4 Drèze’s approach 3.4.1 Moral hazard as a potential revelator of state-dependence 3.4.2 Drèze’s model 3.4.3 The operationalization of the Reversal of Order criterion and virtual observations 3.4.4 Representation and separate identification 3.5 To the lab: can we observe state-dependence? 3.5.1 Health-states proxies and risk behavior 3.5.1.1 Experiment 1 Experimental template 3.5.1.2 Experiment 2 3.5.2 Measuring the impact of moral hazard on the nonadditivity of beliefs References Further reading A conclusive remark: decision theory and the transition from the unconscious to the conscious References Index Back Cover