The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Preference Reversals

  • Chris Starmer
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1692

Abstract

Preference reversal is a widely observed behavioural tendency for the preference ordering of a pair of alternatives to depend on the process used to elicit it. The phenomenon appears to be both a robust and a systematic departure from conventional preference theory. Competing theoretical explanations variously interpret it as a violation of procedure invariance (the presumption that preferences should be independent of the method of eliciting them); a failure of transitivity; or a consequence of loss-averse (and reference-dependent) preferences. This article discusses these interpretations, the related evidence, and reflects on some of the broader implications of the phenomenon.

Keywords

Allais paradox Decision processes Expected utility hypothesis Expected utility theory Intransitivity Loss aversion Preference reversal Preferences Procedure invariance Regret Savage’s subjective expected hypothesis 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Chris Starmer
    • 1
  1. 1.