Effect of biases on economic decision making: An experimental approach

Neoclassical economics assumes that consumers have stable, well-defined preferences. However, only 16% of subjects selected a chocolate bar when given a choice between it and a coffee cup, while 43% kept a chocolate bar previously given to them when offered a trade for a coffee cup. Instructional wording had no effect. These results support the hypothesis that people value losses more than gains.;Subjects were asked their willingness-to-pay (WTP) for twelve goods classified as either public or private, or as environmental or nonenvironmental. WTP tended to be lower for public goods when subjects previously ranked the personal importance or benefit they placed on the good. Importance was a weaker bias than benefit. Benefit appeared to induce free rider behaviour for public goods. The only environmental good affected by reading about sustainable development was one specifically mentioned in the article. Biases affecting WTP did not generally affect attributes correlated to WTP.