糖心TV

Ganna Pogrebna (Department of Economics, University of 糖心TV)

Preference Reversals and Range Effects

(joint work with Hela Maafi)

I will present results from a recent experiment on preference reversals. Much research in decision theory evaluates the probability bet (P-bet) versus the dollar bet ($-bet). The P-bet is a lottery with a relatively high chance of receiving a relatively small outcome. The $-bet is a lottery with a relatively low chance of receiving a relatively large outcome. In two tasks, individuals (a) state a minimum price for selling each lottery and (b) make a straight choice between the lotteries. Although these tasks are equivalent, individuals exhibit preference reversals (henceforth, PR): they tend to state higher minimum price for the $-bet but select P-bet in a straight choice (e.g., Lichtenstein and Slovic, 1971; Seidl, 2002). The purpose of proposed research project is to explore whether and to what extent responses in the P-bet/$-bet comparisons are affected by the interval on which the minimum selling price for each lottery is determined (range effects). We show that restricting selling price range decreases but does not eliminate preference reversals. We also introduce several ways to represent lotteries and discuss the implications of these representations on preference reversals.