Anomalies: Preference Reversals

Amos Tversky; Richard H Thaler

doi:10.1257/jep.4.2.201

Anomalies: Preference Reversals

The Journal of Economic Perspectives ◽

10.1257/jep.4.2.201 ◽

1990 ◽

Vol 4 (2) ◽

pp. 201-211 ◽

Cited By ~ 182

Author(s):

Amos Tversky ◽

Richard H Thaler

Keyword(s):

Preference Order ◽

Preference Reversal ◽

Preference Reversals ◽

Reversal Phenomenon ◽

Traditional Assumption ◽

Preference Reversal Phenomenon ◽

Elicitation Procedure ◽

Relative Weighting

The preference reversal phenomenon has been established in numerous studies during the last two decades, but its causes have only recently been uncovered. This phenomenon, or cluster of phenomena, challenges the traditional assumption that the decisionmaker has a fixed preference order that is captured accurately by any reliable elicitation procedure. If option A is priced higher than option B, we cannot always assume that A is preferred to B in a direct comparison. The evidence shows that different methods of elicitation could change the relative weighting of the attributes and give rise to different orderings.

Download Full-text

Attention and salience in preference reversals

Experimental Economics ◽

10.1007/s10683-021-09740-9 ◽

2022 ◽

Author(s):

Carlos Alós-Ferrer ◽

Alexander Ritschel

Keyword(s):

Eye Movements ◽

Eye Tracking ◽

Preference Reversal ◽

Preference Reversals ◽

Risky Choices ◽

Reversal Phenomenon ◽

The World ◽

Preference Reversal Phenomenon

AbstractWe investigate the implications of Salience Theory for the classical preference reversal phenomenon, where monetary valuations contradict risky choices. It has been stated that one factor behind reversals is that monetary valuations of lotteries are inflated when elicited in isolation, and that they should be reduced if an alternative lottery is present and draws attention. We conducted two preregistered experiments, an online choice study ($$N=256$$ N = 256 ) and an eye-tracking study ($$N=64$$ N = 64 ), in which we investigated salience and attention in preference reversals, manipulating salience through the presence or absence of an alternative lottery during evaluations. We find that the alternative lottery draws attention, and that fixations on that lottery influence the evaluation of the target lottery as predicted by Salience Theory. The effect, however, is of a modest magnitude and fails to translate into an effect on preference reversal rates in either experiment. We also use transitions (eye movements) across outcomes of different lotteries to study attention on the states of the world underlying Salience Theory, but we find no evidence that larger salience results in more transitions.

Download Full-text

Imprecision as an Account of the Preference Reversal Phenomenon

The American Economic Review ◽

10.1257/aer.97.1.277 ◽

2007 ◽

Vol 97 (1) ◽

pp. 277-297 ◽

Cited By ~ 57

Author(s):

David J Butler ◽

Graham C Loomes

Keyword(s):

Preference Reversal ◽

Preference Reversals ◽

Reversal Phenomenon ◽

Descriptive Theory ◽

Preference Reversal Phenomenon

Many individuals' choices and valuations involve a degree of uncertainty/imprecision. This paper reports an experiment designed to obtain some measure of imprecision and to examine the extent to which it can explain preference reversals of two opposite forms, one of which appears not to have been reported previously. The model of imprecision we examine not only predicts both patterns but also provides an account of earlier results that are otherwise not well explained. The results suggest that any successful descriptive theory of choice and valuation will need to allow in some way for the imprecision surrounding people's decisions. (JEL C91, D11, D81)

Download Full-text