An economist encounters some unexpected behavior in a market or laboratory setting.How can he or she distinguish between behavior resulting from mistakes by decision makers as opposed to being decisions based on unusual preferences?

Question

Quizplus · Accepted Answer

Both options A and B provide evidence that can help distinguish between mistakes and unusual preferences. If the behavior is repeated even after opportunities to learn are provided, it suggests that it may be based on an unusual preference rather than a mistake. Additionally, if the behavior is more common among inexperienced individuals, it is also more likely to be a mistake. Therefore the most appropriate answer is C, which combines both options. Option D is incorrect because while it might be difficult to distinguish between the two empirically, it is not impossible.

An Economist Encounters Some Unexpected Behavior in a Market or Laboratory