Preference Reversal
Top Cited Papers
- 16 December 2002
- journal article
- Published by Wiley in Journal of Economic Surveys
- Vol. 16 (5) , 621-655
- https://doi.org/10.1111/1467-6419.00184
Abstract
Preference reversal concerns a systematic divergence between prices of lotteries and subjects’ expressed preferences for playing the respective lotteries. This article surveys the discovery of preference reversal by psychologists, its re–examination and corroboration both by psychologists and later on by (first sceptical) economists, as well as the causes of preference reversal. The preference reversal phenomenon has been explained to be caused by four determinants, viz. by the mode of elicitation of certainty equivalents, by intransitivity of preferences, by overpricing and/or underpricing of lotteries, and by nonlinear probabilities. JEL classification: D81Keywords
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