with Luca Rigotti - University of Pittsburgh
Abstract:
The theoretical literature has characterized and explored the implications of incomplete preferences, but incompleteness is difficult to identify empirically. We design an experiment to detect incomplete preferences in a domain of monetary gambles with subjective uncertainty. To do this, we use subjects' choices to estimate their preferences, and pay them based on their estimated preferences rather than the choices they make. This incentivizes them to reveal when gambles are incomparable. We find 39% of subjects express incompleteness. We provide evidence on the extent of incompleteness and the nature of gambles that are incomparable, and demonstrate how incompleteness is distinct from indifference. We compare these choices to an environment where we force individuals to decide, as in standard experiments. Forced choice leads to more intransitivities and choice reversals. Incompleteness remains at approximately the same levels in an environment of objective uncertainty, suggesting that most incompleteness can be attributed to imprecise tastes rather than imprecise beliefs.