I'm excited to share a new working paper! "Preference Discovery," coauthored with @jasonjdelaney and Thorsten Moenig. Brief thread to follow!
web.williams.edu/Economics/wp/D…
web.williams.edu/Economics/wp/D…
The paper existed in other forms in the past but the last year has seen such intense work on it that it's really a new paper, and I'm really happy about where it's gotten. It was an applied theory paper; we rewrote the theory and added experiments.
The idea is: if you're born not knowing your preferences but have to learn them through experience, do things always work themselves out? And of course the answer is: no. Even if we're rational and forward-looking, there will be things that we never try but would really like.
Undiscovered prefs cause welfare loss forever. Patterns of welfare loss are predictable: more early in life, for expensive things, if you're low-income or risk-averse or impatient, etc. Also for large discrete things, like houses! We get few opportunities to learn what we like.
We ran a simple experiment to test the model and the results are astonishingly supportive of our theory predictions; we also found a pessimistic bias (errors that persist are more likely to be negative), which we conjectured we'd find.
The reason we think our study is important is 1) preference discovery can cause choices to look unstable and can introduce noise into all kinds of data, and 2) undiscovered prefs mean that what we choose *ISN'T NECESSARILY* what's best for us - which has huge policy implications!
