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Empirical Tests of Intransitivity Predicted by Models of Risky Choice

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Author Info
Birnbaum, Michael H.
Schmidt, Ulrich

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Abstract

Recently proposed models of risky choice imply systematic violations of transitivity of preference. Five studies explored whether people show patterns of intransitivity predicted by four descriptive 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 need not be transitive. Error rate for a choice is estimated from preference reversals between repeated presentations of the same choice. Results of five studies 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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Publisher Info
Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2006,10.

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Date of creation: 2006
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Handle: RePEc:zbw:cauewp:5101

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Web page: http://www.wiso.uni-kiel.de/econ/

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Related research
Keywords: decision making; errors; gambling effect; reference points; regret; transitivity;

Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

This paper has been announced in the following NEP Reports:

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  1. Michael Birnbaum, 2005. "A Comparison of Five Models that Predict Violations of First-Order Stochastic Dominance in Risky Decision Making," Journal of Risk and Uncertainty, Springer, vol. 31(3), pages 263-287, December. [Downloadable!] (restricted)
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  3. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
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  6. Loomes, Graham & Starmer, Chris & Sugden, Robert, 1989. "Preference Reversal: Information-Processing Effect or Rational Non-transitive Choice?," Economic Journal, Royal Economic Society, vol. 99(395), pages 140-51, Supplemen. [Downloadable!] (restricted)
  7. Humphrey, Steven J, 2001. "Non-Transitive Choice: Event-Splitting Effects or Framing Effects?," Economica, London School of Economics and Political Science, vol. 68(269), pages 77-96, February. [Downloadable!] (restricted)
  8. Leland, Jonathan W, 1994. "Generalized Similarity Judgments: An Alternative Explanation for Choice Anomalies," Journal of Risk and Uncertainty, Springer, vol. 9(2), pages 151-72, October.
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  12. Carbone, Enrica & Hey, John D, 2000. " Which Error Story Is Best?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 161-76, March. [Downloadable!] (restricted)
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  15. Harless, David W & Camerer, Colin F, 1994. "The Predictive Utility of Generalized Expected Utility Theories," Econometrica, Econometric Society, vol. 62(6), pages 1251-89, November. [Downloadable!] (restricted)
  16. Sugden, Robert, 2003. "Reference-dependent subjective expected utility," Journal of Economic Theory, Elsevier, vol. 111(2), pages 172-191, August. [Downloadable!] (restricted)
  17. Starmer, Chris & Sugden, Robert, 1998. "Testing Alternative Explanations of Cyclical Choices," Economica, London School of Economics and Political Science, vol. 65(259), pages 347-61, August. [Downloadable!] (restricted)
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  19. Viscusi, W Kip, 1989. " Prospective Reference Theory: Toward an Explanation of the Paradoxes," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 235-63, September.
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