Preference Reversals
Grether and Plott (1979)
A common way to spot preference reversals is to ask people to make a choice between two options as well as to state their valuation of those same options. For example, when exposed to the question below, 69.39% of participants chose the Left Bet.
…yet when asked to state their valuation of these lotteries, 71.43% of participants priced the Right Bet higher!
In fact, 67.65% of those that chose the Left Bet valued the Right Bet more.
Across all examples from Grether and Plott (1979) in our replication, we find a preference reversal rate of 45.58%.
Slovic, Griffin, and Tversky (1990)
Slovic, Griffin, and Tversky documented preference reversals even in riskless lotteries.
Replicating their study with stakes five times larger, we observe a preference reversal rate of 55.08%!
People choose an option with a higher probability of winning more than 75% of the time, but assign higher prices to the lottery with the larger reward (but lower probability) 56.78% of the time.
Tversky, Slovic, and Kahneman (1990)
Preference reversals also occur in intertemporal choices. In the example below, 83.33% of subjects chose the first option.
But 64.81% value the delayed payoff more.
Mean response: $1510
Mean response: $1906