Decision Imprecision and the Measurement of Preferences in Multiple Price Lists

Abstract of the Paper

This paper examines how decision imprecision affects the measurement of risk and time preferences in Multiple Price List (MPL) tasks. Using experimental data with alternative elicitation procedures and repeated binary choices, we document systematic relationships between inconsistency in choices and the distribution of elicited switching behavior.
We show that lower decision precision compresses switching behavior toward intermediate rows, reducing the prevalence of corner outcomes. In the risk domain, this compression shifts choices relative to the risk-neutral threshold, increasing the likelihood that observations are classified as risk-loving in low-probability environments. Consistent with this, decision precision affects both the level and probability sensitivity of inferred risk premia.
In the time domain, lower precision is associated with lower estimated discount rates, implying that less precise individuals appear more patient in elicitation data.
Across domains, these results indicate that commonly used measures such as risk premia and discount rates reflect not only underlying preferences but also variation in decision precision and the structure of elicitation tasks. We therefore interpret these measures as reduced-form summaries of switching behavior rather than structural preference parameters.
The evidence is based on a large population-based field experiment in a developing country context, providing external validity to recent findings on cognitive imprecision that have primarily been established in smaller laboratory samples.