TIME-INCONSISTENT PREFERENCES V BELIEFS

Time-Inconsistent Preferences V Beliefs

ABSTRACT

In this paper, both interval weight assignments and interval belief degrees are considered, which could be incurred in many decision situations such as group decision making. Based on the existing ER algorithm, several pairs of preference economics models are constructed to support global sensitivity analysis based on the interval values and to generate the upper and lower bounds of the combined belief degrees for distributed assessment and also the expected values for ranking of alternatives. A post-optimisation procedure is developed to identify non-dominated solutions, examine the robustness of the partial ranking orders generated, and provide guidance for the elicitation of additional information for generating more desirable assessment results. A car evaluation problem is examined to show the implementation process of the proposed approach.

INTRODUCTION

In recent years, behavioral economics has emerged as a bona fide subdiscipline of economics. Because behavioral economics in certain ways represents a sharp departure from mainstream - that is, neoclassical - economics, it raises a number of questions of a philosophical, methodological and historical nature. Yet, to date, it has not received the attention it deserves from historians and philosophers of science? In this chapter, we take some initial steps to address this deficiency. Our purpose is to shed light on (a) the nature and historical origins of behavioral economics as a field, (b) its main results and their interpretation, (c) the methods used by its practitioners, (d) its relationship to traditional economics as well as to other emerging subdisciplines such as neuroeconomics, and (e) some of its philosophical and methodological underpinnings. We make no claim to settle or even raise all issues raised by the emergence of behavioral economics, but do want to go some way toward figuring out what those issues are.

The term "behavioral economics" was in use as early as 1958 (cf. Johnson 1958; Boulding [1958] 1961,21). These days, as it is typically employed, "behavioral economics" refers to the attempt to increase the explanatory and predictive power of economic theory by providing it with more psychologically plausible foundations (Camerer and Loewenstein 2003, cf. Weber and Dawes 2005,91). Notice that behavioral economics so defined has little to do with behaviorism; in fact behavioral economics can trace its roots to cognitive psychology, which emerged in direct opposition to behaviorism (see section 2). The modifier "behavioral" which is sometimes criticized for being redundant on the grounds that all economics is or should be about behavior - stems from the origins of behavioral economics in behavioral decision research. Behavioral economists do not deny that there may be much to learn from sociology, anthropology and other neighboring fields. However, most of the work characterized as behavioral economics these days - and virtually all the work reviewed here - is inspired by psychology. A separate subfield that draws on sociology, and which is sometimes referred to as "socioeconomics," has coalesced around a different set of researchers and journals.

Our main thesis is that the development of behavioral economics in important respects parallels the ...