Attention and salience in preference reversals

We 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.

Coalitional Expected Multi‐Utility Theory

This paper begins by observing that any reflexive binary (preference) relation (over risky prospects) that satisfies the independence axiom admits a form of expected utility representation. We refer to this representation notion as the coalitional minmax expected utility representation. By adding the remaining properties of the expected utility theorem, namely, continuity, completeness, and transitivity, one by one, we find how this representation gets sharper and sharper, thereby deducing the versions of this classical theorem in which any combination of these properties is dropped from its statement. This approach also allows us to weaken transitivity in this theorem, rather than eliminate it entirely, say, to quasitransitivity or acyclicity. Apart from providing a unified dissection of the expected utility theorem, these results are relevant for the growing literature on boundedly rational choice in which revealed preference relations often lack the properties of completeness and/or transitivity (but often satisfy the independence axiom). They are also especially suitable for the (yet overlooked) case in which the decision‐maker is made up of distinct individuals and, consequently, transitivity is routinely violated. Finally, and perhaps more importantly, we show that our representation theorems allow us to answer many economic questions that are posed in terms of nontransitive/incomplete preferences, say, about the maximization of preferences, the existence of Nash equilibrium, the preference for portfolio diversification, and the possibility of the preference reversal phenomenon.