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Preference Reversal: Information-Processing Effect or Rational Non-transitive Choice?

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Author Info
Loomes, Graham
Starmer, Chris
Sugden, Robert

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Abstract

Preference reversal is often explained as an information-processing effect, whereby individuals respond differently to valuation problems than to straight choices. Regret theory offers the alternative explanation that individuals act on consistent, but nontransitive, preferences. Regret theory, in its most general form, is shown to make specific predictions about nontransitive pairwise choices that correspond with the preferences reversal phenomenon. Some experiments designed to discriminate between these two explanations are reported. The main finding is that, as regret theory predicts, the preference reversal phenomenon can be reproduced in situations in which subjects confront only choice problems. Copyright 1989 by Royal Economic Society.

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 99 (1989)
Issue (Month): 395 (Supplement)
Pages: 140-51
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Handle: RePEc:ecj:econjl:v:99:y:1989:i:395:p:140-51

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  1. Cox, James C. & Grether, David M., 1993. "The Preference Reversal Phenomenon: Response Mode, Markets and Incentives," Working Papers 810, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  2. El-Gamal, Mahmoud A. & Grether, David M., 1993. "Uncovering Behavioral Strategies: Likelihood-Based Experimental Data Mining," Working Papers 850, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  3. S. Abu Turab Rizvi, 2001. "Preference Formation and the Axioms of Choice," Review of Political Economy, Taylor and Francis Journals, vol. 13(2), pages 141-159, April. [Downloadable!] (restricted)
  4. Birnbaum, Michael H. & Schmidt, Ulrich, 2006. "Empirical Tests of Intransitivity Predicted by Models of Risky Choice," Economics working papers 2006,10, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
  5. Ulrich Schmidt & Chris Starmer & Robert Sugden, 2005. "Explaining preference reversal with third-generation prospect theory," Discussion Papers 2005-19, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
  6. Michael H. Birnbaun & Ulrich Schmidt, 2008. "An Experimental Investigation of Violations of Transitivity in Choice under Uncertainty," Kiel Working Papers 1396, Kiel Institute for the World Economy. [Downloadable!]
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  7. Elodie Brahic & Valérie Clément & Nathalie Moureau & Marion Vidal, 2008. "A la recherche des Merit Goods," Working Papers 08-08, LAMETA, Universtiy of Montpellier, revised Jun 2008. [Downloadable!]
  8. Chris Starmer, 1996. "Explaining risky choices without assuming preferences," Social Choice and Welfare, Springer, vol. 13(2), pages 201-213, April. [Downloadable!] (restricted)
  9. Belianin Alexis, 1998. "Risk Attitudes and Choice under Uncertainty: Experimental Evidence from Russia," EERC Working Paper Series 98-01e, EERC Research Network, Russia and CIS. [Downloadable!]
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