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

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  • Loomes, Graham
  • Starmer, Chris
  • Sugden, Robert

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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Bibliographic 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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Cited by:
  1. 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.
  2. 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.
  3. Raphaël Giraud, 2005. "Anomalies de la théorie des préférences. Une interprétation et une proposition de formalisation," Revue économique, Presses de Sciences-Po, vol. 56(4), pages 829-854.
  4. Wei Lim & Joo Lee-Partridge & Soo Tan, 2008. "Revenue implication of auction value in k-price sealed-bid auctions: An experimental study," Marketing Letters, Springer, vol. 19(1), pages 25-38, March.
  5. Berg, Nathan & Biele, Guido & Gigerenzer, Gerd, 2010. "Does Consistency Predict Accuracy of Beliefs?: Economists Surveyed About PSA," MPRA Paper 24976, University Library of Munich, Germany.
  6. Schmidt, Ulrich & Starmer, Chris & Sugden, Robert, 2008. "Third-generation prospect theory," Open Access publications from Kiel Institute for the World Economy info:hdl:10419/28932, Kiel Institute for the World Economy.
  7. Freemantle, Nick, 1996. "Are decisions taken by health care professionals rational? A non systematic review of experimental and quasi experimental literature," Health Policy, Elsevier, vol. 38(2), pages 71-81, November.
  8. Michael Birnbaum & Ulrich Schmidt, 2008. "An experimental investigation of violations of transitivity in choice under uncertainty," Journal of Risk and Uncertainty, Springer, vol. 37(1), pages 77-91, August.
  9. Kobi Kriesler & Shmuel Nitzan, 2009. "Framing-Based Choice: A Model of Decision-Making Under Risk," Working Papers 2009-17, Department of Economics, Bar-Ilan University.
  10. 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.
  11. Chris Starmer, 1996. "Explaining risky choices without assuming preferences," Social Choice and Welfare, Springer, vol. 13(2), pages 201-213, April.

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