This paper sheds new light on the preference reversal phenomenon by analyzing decision times in the choice task. In a first experiment, we replicated the standard reversal pattern and found that choices associated with reversals take significantly longer than non-reversals, and non-reversal choices take longer whenever long-shot lotteries are selected. These results can be explained by a combination of noisy lottery evaluations (imprecise preferences) and an overpricing phenomenon associated with the compatibility hypothesis. The first cause explains the existence of reversals, while the second explains the predominance of a particular type thereof. A second experiment showed that the overpricing phenomenon can be shut down, greatly reducing reversals, by using ranking-based, ordinally-framed evaluation tasks. This experiment also disentangled the two determinants of reversals, because imprecise evaluations still deliver testable predictions on decision times even in the absence of the overpricing phenomenon. Strikingly, when unframed ranking tasks were used, decision times in the choice phase were greatly reduced, even though this phase was identical across treatments. This observation is consistent with psychological insights on conflicting decision processes.

Compatibility hypothesis, Decision times, Imprecise preferences, Preference reversals
Laboratory, Individual Behavior (jel C91), Criteria for Decision-Making under Risk and Uncertainty (jel D81),
Journal of Risk and Uncertainty
Erasmus School of Economics

Alós-Ferrer, C, Granić, G.D, Kern, J, & Wagner, A.K. (2016). Preference reversals: Time and again. Journal of Risk and Uncertainty, 52(1), 65–97. doi:10.1007/s11166-016-9233-z