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An Experimental Investigation of Violations of Transitivity in Choice under Uncertainty

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  • Michael H. Birnbaun
  • Ulrich Schmidt

Abstract

Several models of choice under uncertainty imply systematic violations of transitivity of preference. Our experiments explored whether people show patterns of intransitivity predicted by these models. To distinguish “true” violations from those produced by “error,” a model was fit in which each choice can have a different error rate and each person can have a different pattern of true preferences that does not need to be transitive. Error rate for a choice is estimated from preference reversals between repeated presentations of the same choice. Our results showed that very few people repeated intransitive patterns. We can retain the hypothesis that transitivity best describes the data of the vast majority of participants.

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1396.

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Length: 31 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:kie:kieliw:1396

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Keywords: decision making; errors; regret theory; transitivity;

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Citations

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Cited by:
  1. Michael H. Birnbaum & Jeffrey P. Bahra, 2012. "Separating response variability from structural inconsistency to test models of risky decision making," Judgment and Decision Making, Society for Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(4), pages 402-426, July.
  2. John D. Hey & Andrea Morone & Ulrich Schmidt, 2007. "Noise and Bias in Eliciting Preferences," Kiel Working Papers, Kiel Institute for the World Economy 1386, Kiel Institute for the World Economy.
  3. Michael H. Birnbaum, 2012. "A statistical test of independence in choice data with small samples," Judgment and Decision Making, Society for Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(1), pages 97-109, January.
  4. Axel Sonntag, 2013. "Search Costs in Consumer Product Choice: Does Delaying the Provision of Information increase Choice Efficiency?," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS), School of Economics, University of East Anglia, Norwich, UK. 13-05, School of Economics, University of East Anglia, Norwich, UK..
  5. Ulrich Schmidt & Michael Stolpe, 2011. "Transitivity in health utility measurement: An experimental analysis," Health Economics Review, Springer, Springer, vol. 1(1), pages 1-4, December.
  6. Jean Desrochers & J. Francois Outreville, 2013. "Uncertainty, Ambiguity and Risk Taking: an experimental investigation of consumer behavior and demand for insurance," ICER Working Papers, ICER - International Centre for Economic Research 10-2013, ICER - International Centre for Economic Research.
  7. Michael H. Birnbaum, 2013. "True-and-error models violate independence and yet they are testable," Judgment and Decision Making, Society for Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(6), pages 717-737, November.
  8. Aurélien Baillon & Han Bleichrodt & Alessandra Cillo, 2013. "A Tailor-Made Test of Intransitive Choice," Working Papers, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University 496, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  9. Amélie Vrijdags, 2010. "An experimental investigation of transitivity in set ranking," Theory and Decision, Springer, Springer, vol. 68(1), pages 213-232, February.
  10. Amélie Vrijdags, 2013. "Min- and Max-induced rankings: an experimental study," Theory and Decision, Springer, Springer, vol. 75(2), pages 233-266, August.
  11. Michael H. Birnbaum & Jeffrey P. Bahra, 2012. "Testing transitivity of preferences using linked designs," Judgment and Decision Making, Society for Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(5), pages 524-567, September.
  12. Yun-shil Cha & Michelle Choi & Ying Guo & Michel Regenwetter & Chris Zwilling, 2013. "Reply: Birnbaum's (2012) statistical tests of independence have unknown Type-I error rates and do not replicate within participant," Judgment and Decision Making, Society for Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(1), pages 55-73, January.

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