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Non-transitive Preferences over Gains and Losses

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  • Loomes, Graham
  • Taylor, Caron

Abstract

Although transitivity is often regarded as an indispensable principle of rational choice under uncertainty, some decision models allow nontransitive preferences. One of these--regret theory--is consistent with a particular pattern of choice cycles when payoffs are nonnegative and the opposite pattern of cycles when payoffs are nonpositive. This paper presents evidence from an experiment designed to test these implications of regret theory. Copyright 1992 by Royal Economic Society.

Suggested Citation

  • Loomes, Graham & Taylor, Caron, 1992. "Non-transitive Preferences over Gains and Losses," Economic Journal, Royal Economic Society, vol. 102(411), pages 357-365, March.
  • Handle: RePEc:ecj:econjl:v:102:y:1992:i:411:p:357-65
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    References listed on IDEAS

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    1. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
    2. Jones-Lee, M W & Hammerton, M & Philips, P R, 1985. "The Value of Safety: Results of a National Sample Survey," Economic Journal, Royal Economic Society, vol. 95(377), pages 49-72, March.
    3. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    4. Tversky, Amos & Slovic, Paul & Kahneman, Daniel, 1990. "The Causes of Preference Reversal," American Economic Review, American Economic Association, vol. 80(1), pages 204-217, March.
    5. Camerer, Colin F, 1989. "An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 61-104, April.
    6. Sarah Lichtenstein & Paul Slovic, 1973. "Response-induced reversals of preference in gambling: An extended replication in las vegas," Framed Field Experiments 00169, The Field Experiments Website.
    7. Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. "Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March.
    8. Loomes, Graham & Sugden, Robert, 1987. "Some implications of a more general form of regret theory," Journal of Economic Theory, Elsevier, vol. 41(2), pages 270-287, April.
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    Citations

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    Cited by:

    1. Birnbaum, Michael H. & Gutierrez, Roman J., 2007. "Testing for intransitivity of preferences predicted by a lexicographic semi-order," Organizational Behavior and Human Decision Processes, Elsevier, vol. 104(1), pages 96-112, September.
    2. Smith, Richard David, 1996. "Is Regret Theory an alternative basis for estimating the value of healthcare interventions?," Health Policy, Elsevier, vol. 37(2), pages 105-115, August.
    3. Birnbaum, Michael H. & Schmidt, Ulrich, 2006. "Empirical Tests of Intransitivity Predicted by Models of Risky Choice," Economics Working Papers 2006-10, Christian-Albrechts-University of Kiel, Department of Economics.
    4. Demuynck, Thomas, 2011. "The computational complexity of rationalizing boundedly rational choice behavior," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 425-433.
    5. Yves Balasko & Mich Tvede, 2010. "General equilibrium without utility functions: how far to go?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 45(1), pages 201-225, October.
    6. Graham Loomes, 2005. "Modelling the Stochastic Component of Behaviour in Experiments: Some Issues for the Interpretation of Data," Experimental Economics, Springer;Economic Science Association, vol. 8(4), pages 301-323, December.
    7. Brett Day & Graham Loomes, 2010. "Conflicting violations of transitivity and where they may lead us," Theory and Decision, Springer, vol. 68(1), pages 233-242, February.
    8. Alexia Gaudeul, 2009. "A (Micro) Course in Microeconomic Theory for MSc Students," Working Papers id:1986, eSocialSciences.
    9. Ulrich Schmidt & Michael Stolpe, 2011. "Transitivity in health utility measurement: An experimental analysis," Health Economics Review, Springer, vol. 1(1), pages 1-4, December.
    10. Gowdy, John M., 2004. "Altruism, evolution, and welfare economics," Journal of Economic Behavior & Organization, Elsevier, vol. 53(1), pages 69-73, January.
    11. Han Bleichrodt & Peter P. Wakker, 2015. "Regret Theory: A Bold Alternative to the Alternatives," Economic Journal, Royal Economic Society, vol. 0(583), pages 493-532, March.
    12. Michael Birnbaum & Ulrich Schmidt, 2008. "An experimental investigation of violations of transitivity in choice under uncertainty," Journal of Risk and Uncertainty, Springer, vol. 37(1), pages 77-91, August.

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