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Preference Reversal And Expert - Papers

Preference Reversal And Expert

Subjects in gambling tasks that involve both choice and pricing show a pattern of responses known as preference reversal. That is, although subjects in a choice condition generally will give higher preference ratings to “safe”, high-probability/low-payoff, bets than to “longshot”, low-probability/high-payoff, bets, when they are asked in a pricing condition to generate an amount of money that they would accept to avoid the gamble altogether they tend to give higher values for longshots over safer bets. Tversky, Slovic, and Kahneman (1990) demonstrate that among the several possible actions that subjects could be taking to produce this pattern, the critical ...

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factors influencing the decision. Since the payoffs of the bets and the buy-out prices assigned to them are both monetary values, this leads people to give greater weight to the payoff value of the bets when asked to price them (a situation of compatibility) than when asked to choose between them (a situation of non-compatibility).
The development of expertise in avoiding preference reversal, then, would have to involve the circumvention of the compatibility effect. One possible way in which this could occur would involve subjects consistently selecting either payoff or probability as the critical factor in both choice and pricing conditions. By adopting a strategy of maximizing the chance of any payoff in both the choice and pricing condition and giving that option the higher rating on both scales, preference reversal would be avoided. Conversely, considering only the greatest potential for gain in each condition would have the same effect.
This strategy, however, would be ...

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Preference Reversal And Expert. (2005, November 20). Retrieved December 2, 2024, from http://www.essayworld.com/essays/Preference-Reversal-And-Expert/36789

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PAPER DETAILS

Added: 11/20/2005 10:21:42 PM
Category: Miscellaneous
Type: Free Paper
Words: 520
Pages: 2

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