Hypothetical Expected Utility
It offers a concrete definition and methodology to identify flawed hypothetical reasoning from standard economic data, which is incremental for economic theory and decision analysis.
The paper tackles the problem of analyzing and identifying a decision maker's hypothetical reasoning by providing a model that shows this propensity is captured by their ability to recognize implications, which can be derived from observable behavior.
This paper provides a model to analyze and identify a decision maker's (DM's) hypothetical reasoning. Using this model, I show that a DM's propensity to engage in hypothetical thinking is captured exactly by her ability to recognize implications (i.e., to identify that one hypothesis implies another) and that this later relation is encoded by a DM's observable behavior. Thus, this characterization both provides a concrete definition of (flawed) hypothetical reasoning and, importantly, yields a methodology to identify these judgments from standard economic data.