Working Paper Number
WP #15015, September 2015
The preference reversal phenomenon is an iconic empirical puzzle in decision theory: inconsistent preference rankings for and pricing of a low-payoff, high-probability lottery and a high-payoff, low-probability lottery. The preference reversal phenomenon has long challenged standard economic theory. We test whether pre-play learning removes preference reversals. Pre-play learning denotes ex-ante lottery learning, where subjects observe playing lotteries before making decisions. In our experiment, we find that, with pre-play learning, subjects indicate minimum willingness to sell prices for lotteries consistent with their choices, suggesting that pre-play learning removes preference reversals.
C91, D12, D81
Kim, Younjun and Hoffman, Elizabeth, "The role of pre-play learning in understanding and eliminating the preference reversal phenomenon" (2015). Economics Working Papers (2002–2016). 8.