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ASYMMETRIC VALUATION OF GAINS AND LOSSES AND PREFERENCE ORDER ASSUMPTIONS
Author(s) -
KNFTSCH JACK L.
Publication year - 1995
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1995.tb01851.x
Subject(s) - economics , transitive relation , valuation (finance) , axiom , microeconomics , revealed preference , preference , order (exchange) , dominance (genetics) , econometrics , mathematical economics , mathematics , biochemistry , chemistry , geometry , finance , combinatorics , gene
Recent findings of large differences between people's valuations of gains and losses imply that the common preference order axioms of completeness, transitivity, and dominance, on which economic analyses and predictions of consumer behavior are largely based, may not be consistent with actual choices. This paper reports the results of an experimental test of the preference order assumptions using real exchanges of two goods and money. The findings show consistent differences in the valuation placed on goods and money depending on whether the entitlements are being acquired or given up, and provide direct evidence of preference assumption violations.