Learning to be Homo Economicus: Can an LLM Learn Preferences from Choice

Author:

Jeongbin Kim, Matthew Kovach, Kyu-Min Lee, Euncheol Shin, Hector Tzavellas

Keyword:

Economics, General Economics, General Economics (econ.GN)

journal:

date:

2024-01-14 00:00:00

Abstract

This paper explores the use of Large Language Models (LLMs) as decision aids, with a focus on their ability to learn preferences and provide personalized recommendations. To establish a baseline, we replicate standard economic experiments on choice under risk (Choi et al., 2007) with GPT, one of the most prominent LLMs, prompted to respond as (i) a human decision maker or (ii) a recommendation system for customers. With these baselines established, GPT is provided with a sample set of choices and prompted to make recommendations based on the provided data. From the data generated by GPT, we identify its (revealed) preferences and explore its ability to learn from data. Our analysis yields three results. First, GPT's choices are consistent with (expected) utility maximization theory. Second, GPT can align its recommendations with people's risk aversion, by recommending less risky portfolios to more risk-averse decision makers, highlighting GPT's potential as a personalized decision aid. Third, however, GPT demonstrates limited alignment when it comes to disappointment aversion.

PDF: Learning to be Homo Economicus: Can an LLM Learn Preferences from Choice.pdf