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Inconsistent Trade-Offs Between Attributes: New Evidence in Preference Assessment Biases

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  • Philippe Delquié

    (Graduate School of Business, The University of Texas at Austin, Department of MSIS, CBA 5.202, Austin, Texas 78712-1175)

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    Abstract

    One of the fundamental postulates of rational choice is that preferences manifested by an individual towards alternatives should only depend on the merits of these alternatives and not on extraneous, irrelevant factors. Violations of this basic principle, so-called preference reversals, have puzzled researchers for over twenty years and raised concerns about the use of preference modeling in decision analysis. The present work seeks to further determine the nature of these phenomena, in particular the role played by response mode in certain types of preference reversals. Hershey and Schoemaker (1985) found Probability and Certainty Equivalents to differ systematically and attributed this difference to a framing effect. Here, we generalize their experimental design to control for framing effects and study biases on a larger scope. Our results show that biases do not disappear in the absence of framing, instead they reveal a clear and pervasive bias occurring under more controlled experimental conditions than previously known: direct trade-offs between two attributes X and Y are biased depending on whether X is traded off against Y, or Y traded off against X. From among several hypotheses, the data lend support to the general principle of compatibility (Tversky et al. 1988; Slovic et al. 1990), which implies that an attribute receives more relative weight when it is used as "currency" in trading off.

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    File URL: http://dx.doi.org/10.1287/mnsc.39.11.1382
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 39 (1993)
    Issue (Month): 11 (November)
    Pages: 1382-1395

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    Handle: RePEc:inm:ormnsc:v:39:y:1993:i:11:p:1382-1395

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    Related research

    Keywords: decision analysis; utility theory; preference models; heuristics and biases;

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    Cited by:
    1. Han Bleichrodt & Jose María Abellán Perpiñán & Jose Luis Pinto-Prades & Ildefonso Méndez-Martínez, 2006. "Resolving Inconsistencies in Utility Measurement under Risk: Tests of Generalizations of Expected Utility," Working Papers 06.19, Universidad Pablo de Olavide, Department of Economics.
    2. Sylvie M. C. van Osch & Anne M. Stiggelbout, 2008. "The construction of standard gamble utilities," Health Economics, John Wiley & Sons, Ltd., vol. 17(1), pages 31-40.
    3. Anne Rozan, 2004. "Benefit Transfer: A Comparison of WTP for Air Quality between France and Germany," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(3), pages 295-306, November.
    4. Olivier Chanel & Graciela Chichilnisky, 2009. "The influence of fear in decisions: Experimental evidence," Journal of Risk and Uncertainty, Springer, vol. 39(3), pages 271-298, December.
    5. Han Bleichrodt & José Luis Pinto, 2000. "An experimental test of loss aversion and scale compatibility," Working Papers, Research Center on Health and Economics 467, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Vetschera, Rudolf, 1996. "A recursive algorithm for volume-based sensitivity analysis of linear decision models," Discussion Papers, Series 1 279, University of Konstanz, Department of Economics.
    7. Han Bleichrodt, 2002. "A new explanation for the difference between time trade-off utilities and standard gamble utilities," Health Economics, John Wiley & Sons, Ltd., vol. 11(5), pages 447-456.
    8. Christopher Schwand & Rudolf Vetschera & Lea Wakolbinger, 2010. "The influence of probabilities on the response mode bias in utility elicitation," Theory and Decision, Springer, vol. 69(3), pages 395-416, September.
    9. Han Bleichrodt & José Luis Pinto, 2000. "An experimental test of loss aversion and scale compatibility," Economics Working Papers 467, Department of Economics and Business, Universitat Pompeu Fabra.

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