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"Preference Reversal' and the Observability of Preferences by Experimental Methods

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Karni, Edi
Safra, Zvi

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Abstract

This paper shows that: (1) the "preference reversal" phenomenon can be consistent with transitive preferences if these preferences violate the independence axiom of expected utility theory and (2) for the class of experiments that were used to produce the evidence concerning "preference reversal," the elicitation of certainty equivalents is possible if, and only if, the respondent's preferences can be represented by functionals that are linear in the probabilities. Furthermore, a more general class of experiments is not immune to "preference reversal" if nonexpected utility preferences are admitted. Copyright 1987 by The Econometric Society.

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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 55 (1987)
Issue (Month): 3 (May)
Pages: 675-85
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Handle: RePEc:ecm:emetrp:v:55:y:1987:i:3:p:675-85

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  4. M. Levati & Andrea Morone & Annamaria Fiore, 2009. "Voluntary contributions with imperfect information: An experimental study," Public Choice, Springer, vol. 138(1), pages 199-216, January. [Downloadable!] (restricted)
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  6. Robert Lapson, 1992. "Expected Value," Discussion Papers 1037, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  8. 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!]
  9. Peter Bohm & Hans Lind, 1993. "Preference Reversal, Real-World Lotteries, and Lottery-Interested Subjects," Framed Field Experiments 0013, The Field Experiments Website. [Downloadable!]
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  11. Yoram Amiel & Frank A Cowell & Leima Davidovitz & Avraham Polovin, 2003. "Preference Reversals and the Analysis of Income Distributions," STICERD - Distributional Analysis Research Programme Papers 66, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
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