Preference Reversals without the Independence Axiom

James Cox and Seth Epstein

American Economic Review, 1989, vol. 79, issue 3, 408-26

Abstract: The preference reversal phenomenon was believed to be inconsistent with the transitivity axiom of decision theory. However, recent theoretical papers have demonstrated that the preference reversals that were observed in earlier experiments could be explained by subject violations of the independence axiom or the compound lottery axiom. Therefore, those preference reversals are not known to be inconsistent with generalization of expected utility theory that replace the independence axiom. The present paper reports the results of experiments in which a substantial proportion of subject responses violate the asymmetry axiom. These results are inconsistent with expected utility theory and its generalizations. Copyright 1989 by American Economic Association.

Date: 1989
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