Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Do preference reversals generalise?
T2 - Results on ambiguity and loss aversion
AU - Ball, Linden J.
AU - Bardsley, Nicholas
AU - Ormerod, Thomas
PY - 2012/2
Y1 - 2012/2
N2 - Preference reversals are frequently observed in the lab, but almost all designs use completely transparent prospects, which are rarely features of decision making elsewhere. This raises questions of external validity. We test the robustness of the phenomenon to gambles that incorporate realistic ambiguity in both payoffs and probabilities. In addition, we test a recent explanation of preference reversals by loss aversion, which would also restrict the incidence of reversals outside the lab. According to this account, reversals occur largely because the valuation task endows subject with a gamble, activating loss aversion. This contrasts with the choice task, where the reference point is pre-experiment wealth. We test this explanation by holding the reference point constant. Our evidence suggests that reversals are only slightly diminished with ambiguity. We find no evidence supporting their explanation by loss aversion. (C) 2011 Elsevier B.V. All rights reserved.
AB - Preference reversals are frequently observed in the lab, but almost all designs use completely transparent prospects, which are rarely features of decision making elsewhere. This raises questions of external validity. We test the robustness of the phenomenon to gambles that incorporate realistic ambiguity in both payoffs and probabilities. In addition, we test a recent explanation of preference reversals by loss aversion, which would also restrict the incidence of reversals outside the lab. According to this account, reversals occur largely because the valuation task endows subject with a gamble, activating loss aversion. This contrasts with the choice task, where the reference point is pre-experiment wealth. We test this explanation by holding the reference point constant. Our evidence suggests that reversals are only slightly diminished with ambiguity. We find no evidence supporting their explanation by loss aversion. (C) 2011 Elsevier B.V. All rights reserved.
KW - Preference reversals
KW - External validity
KW - Ambiguity
KW - Loss aversion
KW - CHOICE
U2 - 10.1016/j.joep.2011.09.001
DO - 10.1016/j.joep.2011.09.001
M3 - Journal article
VL - 33
SP - 48
EP - 57
JO - Journal of Economic Psychology
JF - Journal of Economic Psychology
SN - 0167-4870
IS - 1
ER -