Basing Decisions on Rank-Order Framing

Neil Stewart, Stian Reimers, Adam J. L. Harris write,

people behave as if the subjective value of an amount (or probability or or delay) is determined, at least in part, by its rank position in the set of values currently in a person’s head. So, for example, $10 has a higher subjective value in the set $2, $5, $8, and $15 because it ranks 2nd, but has a lower subjective value in the set $2, $15, $19, and $25 because it ranks 4th

Pointer from Robin Hanson. As usual, I wonder how well this works in a world where people learn from their past behavior. But this does provide a general theory of a lot of behavioral economics findings concerning biased decisions with respect to risk and time.

1 thought on “Basing Decisions on Rank-Order Framing

  1. We might call this the ordinal sin. Maybe it is because fungible assets are a new thing in human evolutionary history.

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