Testing Explanations of Preference Reversal

Abstract

We present a new experimental investigation of preference reversal. Although economists and psychologists have suggested a variety of accounts for this phenomenon, the existing data do not adequately discriminate between them. Relative to previous studies, our design offers enhanced control for economic explanations and new tests of psychological hypotheses. We find a pattern of preference reversals that is inconsistent with all of the best‐known explanations of the phenomenon proposed by economists, with the fundamental economic assumption of context‐free preferences, and with several psychological theories of preference reversal. We explore the explanatory strategies that survive exposure to our data.