Misconceptions and Game Form Recognition: Challenges to Theories of Revealed Preference and Framing

This study explores the tension between the standard economic theory of preference and non-standard theories of preference that are motivated by an underlying theory of framing. A simple experiment was performed to measure a known preference, the value of a card that can be exchanged for $2 cash. The measurement does not produce the known preference and instead reports a preference that has properties often cited in support of non-standard preference theories and framing. Close examination reveals that the divergence of the measured preference from the known preference reflects a mistake, arising from some subjects’ misconception of the game form. We conclude that choice data should not be granted an unqualified interpretation of preference revelation, and that mistakes in choices can masquerade as having been produced by non-standard preferences and may reflect an error at the foundation of the theory of framing.