Testing transitivity of preferences using linked designs

Michael H. Birnbaum · Jeffrey P. Bahra

16 citations0/0 files storedJudgment and Decision Making

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Decision-Making and Behavioral Economics Economic and Environmental Valuation Experimental Behavioral Economics Studies

Abstract

Abstract Three experiments tested if individuals show violations of transitivity in choices between risky gambles in linked designs. The binary gambles varied in the probability to win the higher (better) prize, the value of the higher prize, and the value of the lower prize. Each design varied two factors, with the third fixed. Designs are linked by using the same values in different designs. Linked designs allow one to determine if a lexicographic semiorder model can describe violations of transitivity in more than one design using the same parameters. In addition, two experiments tested interactive independence, a critical property implied by all lexicographic semiorder models. Very few people showed systematic violations of transitivity; only one person out of 136 showed violations of transitivity in two designs that could be linked by a lexicographic semiorder. However, that person violated interactive independence, as did the majority of other participants. Most individuals showed systematic violations of the assumptions of stochastic independence and stationarity of choice responses. That means that investigators should evaluate models with respect to response patterns (response combinations) rather than focusing entirely on choice proportions.

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References

1992Advances in prospect theory: Cumulative representation of uncertainty 1962Individual Choice Behavior 1969Intransitivity of preferences.1956Semiorders and a Theory of Utility Discrimination 2010Prospect Theory: For Risk and Ambiguity 2006The priority heuristic: Making choices without trade-offs.2008New paradoxes of risky decision making.2000Utility of Gains and Losses: Measurement-Theoretical and Experimental Approaches

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