Preference

Preferences and Decision-Making

• Preferences reflect an individual's attitude towards a set of objects.
• Preferences can be influenced by decision-making processes, even unconsciously.
• Factors such as surroundings, upbringing, and repeated exposure can affect preference.
• Preferences can be reflected in explicit decision-making processes.
• Preferences are not necessarily stable over time.
• Preferences in economics refer to the assumptions related to ordering alternatives based on happiness, satisfaction, gratification, or utility.
• Rational Choice Theory suggests that individuals make decisions based on rational preferences aligned with self-interests.
• Consumer preferences have properties like completeness, transitivity, and non-satiation.
• Preferences can be represented by utility functions.
• Expected Utility Theory explains that individuals maximize the expected value of a utility function based on preferences.

Risk Preference

• Risk preference refers to how much risk a person is willing to accept based on expected utility or pleasure of the outcome.
• Risk tolerance is an important component of personal financial planning.
• Risk preference can be characterized by engaging in advantageous behaviors that may involve potential loss.
• In economics, risk preference involves engaging in behaviors with greater variance returns, often associated with monetary rewards.
• There are two traditions of measuring risk preference: revealed and stated preference.

Relation to Desires

• Preferences and desires are conative states that determine behavior.
• Desires are directed at one object, while preferences involve a comparison between two alternatives.
• Preferences are often focused on in decision theory.
• Preferences can be defined in terms of desires, with desires involving a degree or intensity.
• Preferences reflect the strength of desires for different alternatives.

Mathematical Foundations

• Gérard Debreu laid down the mathematical foundations for common types of preferences.
• Andranik Tangian developed methods for eliciting preferences based on Debreu's work.
• Additive and quadratic preference functions can be constructed from interviews.
• Rational preferences and Rational Choice Theory do not always accurately predict human behavior.
• Behavioral economics offers an alternative approach by considering deviations from rational preferences.

Insolvency

• Insolvency can refer to a situation where a company pays specific creditors, making them better off than others.
• Companies may seek formal insolvency procedures like administration or liquidation after paying preferred creditors.
• Preferences occur when there is a desire to make a creditor better off, leading to potential legal action.
• Wrongful trading and disqualification are risks associated with preferences.
• The rules on preferences require proving that transactions result from ordinary commercial considerations.

Preference Mentions

Preference Data Sources