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Do Preference Reversals Disappear When We Allow for Probabilistic Choice?

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  • Graham Loomes

    (Warwick Business School, University of Warwick, Coventry CV4 7AL, United Kingdom)

  • Ganna Pogrebna

    (International Institute for Product and Service Innovation, Warwick Manufacturing Group, University of Warwick, Coventry CV4 7AL, United Kingdom)

Abstract

The “preference reversal phenomenon,” a systematic disparity between people’s valuations and choices, poses challenges for theory and policy. Using a very general formulation of probabilistic preferences, we show that the phenomenon is not mainly due to intransitive choice. We find a high degree of regularity within choice tasks and also within valuation tasks, but the two types of tasks appear to evoke very different cognitive processes, even when the experimental environment tries to minimise differences. We discuss possible implications for modelling and eliciting preferences.

Suggested Citation

  • Graham Loomes & Ganna Pogrebna, 2017. "Do Preference Reversals Disappear When We Allow for Probabilistic Choice?," Management Science, INFORMS, vol. 63(1), pages 166-184, January.
    • Handle: RePEc:inm:ormnsc:v:63:y:2017:i:1:p:166-184
    DOI: 10.1287/mnsc.2015.2333
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    Cited by:

    1. Raúl López-Pérez & Eli Spiegelman, 2020. "Using Eye-Tracking Techniques To Understand The Role Of Attention On Choice And Reversals," Working Papers 2001, Instituto de Políticas y Bienes Públicos (IPP), CSIC.
    2. Guo, Liang, 2021. "Contextual deliberation and the choice-valuation preference reversal," Journal of Economic Theory, Elsevier, vol. 195(C).
    3. Sara Arts & Qiyan Ong & Jianying Qiu, 2024. "Measuring decision confidence," Experimental Economics, Springer;Economic Science Association, vol. 27(3), pages 582-603, July.
    4. Liu Shi & Jianying Qiu & Jiangyan Li & Frank Bohn, 2024. "Consciously stochastic in preference reversals," Journal of Risk and Uncertainty, Springer, vol. 68(3), pages 255-297, June.
    5. Gao, Shiping & Li, Nan, 2023. "Preference reversal and the evolution of cooperation," Applied Mathematics and Computation, Elsevier, vol. 438(C).
    6. Balcombe, Kelvin & Fraser, Iain, 2024. "A Note on an Alternative Approach to Experimental Design of Lottery Prospects," MPRA Paper 119743, University Library of Munich, Germany.
    7. Zhihua Li & Graham Loomes, 2022. "Revisiting the diagnosis of intertemporal preference reversals," Journal of Risk and Uncertainty, Springer, vol. 64(1), pages 19-41, February.
    8. Carlos Alós-Ferrer & Johannes Buckenmaier & Michele Garagnani, 2020. "Stochastic choice and preference reversals," ECON - Working Papers 370, Department of Economics - University of Zurich, revised Jul 2021.

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