Causes of Preference Reversal Phenomenon

Chapter 3 provided descriptions of preference reversal phenomenonPreference reversal phenomenon. This phenomenon was reported first by psychologists such as[aut]Lindman, H. R. (Lindman, 1971) and Lichtenstein and[aut]Lichtenstein, S. R. Slovic (Slovic and Lichtenstein, 1971; Slovic and Lichtenstein, 1968) as the[aut]Slovic, P. phenomenon of preference relationPreference relation inconsistency that results from the methods of selection and pricingPricing in gambles. The selection problem of these studies had the test subjects choose between Gamble H with a high winning percentage and a small amount of prize money (i.e., the winning percentage is 28/36 and the prize is $10) and Gamble L with a low winning percentage and a large amount of prize money (i.e., the winning percentage 3/36 and the prize is $100). The pricingPricing question asked how much the lowest probable price at which Gamble H and Gamble L could be sold if the respondents owned them. In most cases, Gamble H was preferred in the selection problem and Gamble L was[aut]Slovic, P. priced higher than the others in the pricing question[aut]Lichtenstein, S. R. (Slovic, 1995; Slovic and Lichtenstein, 1983; Tversky and Thaler, 1990)[aut]Thaler, R. H.. According[aut]Tversky, A. to (Tversky et al., 1990), this preference reversal phenomenonPreference reversal phenomenon is divisible into three phases. The first is the phase of the discovery of this phenomenon by psychologists that occurred between the end of the 1960s and the beginning of the 1970s[aut]Lindman, H. R. (e.g., Lichtenstein and Slovic, 1971; Lindman, 1971; Slovic and Lichtenstein, 1968). The[aut]Lichtenstein, S. R. second[aut]Slovic, P. was the phase of follow-up research conducted by economists between the end of the 1970s and the beginning of the 1980s, which led to the discovery that the preference reversal phenomenonPreference reversal phenomenon was firmly present even if the monetary incentive was manipulated[aut]Grether, D. M. (e.g., Grether and Plott, 1979). Subsequently[aut]Plott, C. R., the third was the phase of theoretical studies designed to reveal the causes of the preference reversal phenomenonPreference reversal phenomenon that began increasing in the[aut]Tversky, A. 1980s[aut]Loomes, G. (e.g., Loomes and Sugden, 1989; Tversky et al., 1990). Studies[aut]Sugden, R. designed to find the causes of the preference reversal phenomenonPreference reversal phenomenon continue today in the fields of psychology and[aut]Dhami, S. economics[aut]Cubitt, R. P. (Cubitt et al., 2004; Dhami, 2016; Starmer, 2000; Takemura, 1996; Takemura, 2020;). This[aut]Starmer, C. chapter[aut]Takemura, K introduces major studies that have sought the causes of the preference reversal phenomenonPreference reversal phenomenon and characterizes this decision-making phenomenon.