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Type | Working Paper |
Scope | Discipline-based scholarship |
Title | Preference Reversals and Probabilistic Choice |
Organization Unit | |
Authors |
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Language |
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Institution | University of Zurich |
Series Name | Working paper series / Institute for Empirical Research in Economics |
Number | No. 383 |
ISSN | 1424-0459 |
Date | 2008 |
Abstract Text | Preference reversals occur when different (but formally equivalent) elicitation methodsnreveal conflicting preferences over two alternatives. This paper shows that when people have fuzzy preferences i.e. when they choose in a probabilistic manner, their observed decisions can generate systematic preference reversals. A simple model of probabilistic choice and valuation can account for a higher incidence of standard (nonstandard) preference reversals for certainty (probability) equivalents and it can also rationalize the existence of strong reversals. An important methodological contribution of the paper is a new definition of a probabilistic certainty/probability equivalent of a risky lottery. |
Official URL | http://www.econ.uzh.ch/wp.html |
PDF File | Download from ZORA |
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