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Preference reversals have been widely studied using risky or riskless gambles. However, little is known about preference reversals under ambiguity (unknown probabilities). Subjects were asked to make a binary choice between ambiguous P-bets (big likelihood of giving small prize) and ambiguous $-bets (small likelihood of giving large prize) and their willingness to accept was elicited. Subjects then performed the same two tasks with risky bets, where the probability of winning for a given risky bet is the center of the probability interval of the corresponding ambiguous bet. Preference reversals are not only replicated under ambiguity but are even stronger than are those under risk. This is due to higher elicited prices for the $-bet and lower elicited prices for the P-bet under ambiguity than under risk. This result can be explained by the shape of the weighting function for different levels of uncertainty and for different elicitation modes. This paper was accepted by Peter Wakker, decision analysis.

A central question in psychology and economics is the determination of whether individuals react differently to different values of a cared-about attribute (e.g., different income levels, different gas prices, and different ambient temperatures). Building on and significantly extending our earlier work on preference reversals between joint and separate evaluations, we propose a general evaluability theory (GET) that specifies when people are value sensitive and when people mispredict their own or others' value sensitivity. The GET can explain and unify many seemingly unrelated findings, ranging from duration neglect to affective forecasting errors and can generate many new research directions on topics ranging from temporal discounting to subjective well-being.

The tendency to make unhealthy choices is hypothesized to be related to an individual's temporal discount rate, the theoretical rate at which they devalue delayed rewards. Furthermore, a particular form of temporal discounting, hyperbolic discounting, has been proposed to explain why unhealthy behavior can occur despite healthy intentions. We examine these two hypotheses in turn. We first systematically review studies which investigate whether discount rates can predict unhealthy behavior. These studies reveal that high discount rates for money (and in some instances food or drug rewards) are associated with several unhealthy behaviors and markers of health status, establishing discounting as a promising predictive measure. We secondly examine whether intention-incongruent unhealthy actions are consistent with hyperbolic discounting. We conclude that intention-incongruent actions are often triggered by environmental cues or changes in motivational state, whose effects are not parameterized by hyperbolic discounting. We propose a framework for understanding these state-based effects in terms of the interplay of two distinct reinforcement learning mechanisms: a \"model-based\" (or goal-directed) system and a \"model-free\" (or habitual) system. Under this framework, while discounting of delayed health may contribute to the initiation of unhealthy behavior, with repetition, many unhealthy behaviors become habitual; if health goals then change, habitual behavior can still arise in response to environmental cues. We propose that the burgeoning development of computational models of these processes will permit further identification of health decision-making phenotypes.

Paradoxical decision-making behaviours such as preference reversal often arise from imprecise or noisy human preferences. Harnessing the physical principle of magnetisation reversal in ferromagnetic nanostructures, we developed a model that closely reflects human decision-making dynamics. Tested against a spectrum of psychological data, our model adeptly captures the complexities inherent in individual choices. This blend of physics and psychology paves the way for fresh perspectives on understanding the imprecision of human decision-making processes, extending the reach of the current classical and quantum physical models of human behaviour and decision making.

Prior research suggests that consumers experience psychological discomfort when they make a choice under attitudinal ambivalence. The research reported here examines systematic cross-cultural variations in psychological discomfort as a function of dialectical thinking and attitudinal ambivalence in the context of choice. It shows that compared to nondialectical (Western) consumers, dialectical (Eastern) consumers experience less psychological discomfort when they hold bivalent evaluations of the focal object, but more psychological discomfort when they hold univalent evaluations (Study 1). It also identifies “uncertainty about making the correct choice” as the underlying process that accounts for these findings (Study 2). In addition, this research explores the downstream effects of psychological discomfort on choice deferral in the context of free choice (Study 3) and preference reversal in the context of forced choice (Study 4). Contributions to and implications for research on attitudinal ambivalence, choice behavior, and dialectical thinking are discussed.

This paper begins by observing that any reflexive binary (preference) relation (over risky prospects) that satisfies the independence axiom admits a form of expected utility representation. We refer to this representation notion as the coalitional minmax expected utility representation. By adding the remaining properties of the expected utility theorem, namely, continuity, completeness, and transitivity, one by one, we find how this representation gets sharper and sharper, thereby deducing the versions of this classical theorem in which any combination of these properties is dropped from its statement. This approach also allows us to weaken transitivity in this theorem, rather than eliminate it entirely, say, to quasitransitivity or acyclicity. Apart from providing a unified dissection of the expected utility theorem, these results are relevant for the growing literature on boundedly rational choice in which revealed preference relations often lack the properties of completeness and/or transitivity (but often satisfy the independence axiom). They are also especially suitable for the (yet overlooked) case in which the decision-maker is made up of distinct individuals and, consequently, transitivity is routinely violated. Finally, and perhaps more importantly, we show that our representation theorems allow us to answer many economic questions that are posed in terms of nontransitive/incomplete preferences, say, about the maximization of preferences, the existence of Nash equilibrium, the preference for portfolio diversification, and the possibility of the preference reversal phenomenon.

In preference reversals, subjects express different rankings over a set of alternatives depending on how preferences are elicited. In classical reversal tasks, for instance, subjects often select a safe bet over a risky one when given a choice between the two in a pair, but then assign a higher monetary evaluation to the risky bet. Motivated by a rich literature on context-dependent preferences, we conjecture that comparisons across bets in a pair can influence both Choice and Evaluation. Yet deciders are less likely to mentally compare the bets in the latter case, as bets are typically evaluated in isolation. This asymmetry between Choice and Evaluation is, we surmise, one cause of the reversals. If we further assume that memory decay affects mental comparisons in Evaluation, the account predicts order and timing effects on the reversal probability. We run several treatments designed to facilitate or hinder the retrieval from memory of the alternative bet during evaluation of a bet. However, the reversal rate does not vary across treatments in the predicted direction, and we find no systematic order or timing effects. We conclude that reversals are not influenced by the ease with which subjects recall the alternative bet during the evaluations, which suggests in turn that a relatively smaller frequency of comparisons across bets during the (typically isolated) evaluations is not a significant cause of reversals.

The “preference reversal phenomenon,” a systematic disparity between people’s valuations and choices, poses challenges for theory and policy. Using a very general formulation of probabilistic preferences, we show that the phenomenon is not mainly due to intransitive choice. We find a high degree of regularity within choice tasks and also within valuation tasks, but the two types of tasks appear to evoke very different cognitive processes, even when the experimental environment tries to minimise differences. We discuss possible implications for modelling and eliciting preferences. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2015.2333 . This paper was accepted by Manel Baucells, decision analysis .

Abstract The anatomical, structural, and functional adaptations that occur in the brain during adolescence are thought to facilitate improvements in decision-making functions that are known to occur during this stage of development. The mechanisms that underlie these neural adaptations are not known, but deviations in developmental trajectories have been proposed to contribute to the emergence of mental illness, including addiction. Direct evidence supporting this hypothesis, however, has been limited. Here, we used a recently developed reversal-learning protocol to investigate the predictive relationship between adolescent decision-making trajectories and cocaine-taking behaviors in adulthood. Decision-making functions in the reversal-learning task were assessed throughout adolescence and into adulthood in male and female Long–Evans rats. Trial-by-trial choice data was fitted with a reinforcement-learning model to quantify the degree to which choice behavior of individual rats was influenced by rewarded (e.g., ∆+ parameter) and unrewarded (e.g., ∆0 parameter) outcomes. We report that reversal-learning performance improved during adolescence and that this was due to an increase in value updating for rewarded outcomes (e.g., ∆+ parameter). Furthermore, the rate of change in the ∆+ parameter predicted individual differences in the ∆+ parameter and, notably, cocaine-taking behaviors in adulthood: Rats that had a shallower adolescent trajectory were found to have a lower ∆+ parameter and greater cocaine self-administration in adulthood. These data indicate that adolescent development plays a critical role in drug use susceptibility. Future studies aimed at understanding the neurobiological mechanisms that underlie these age-related changes in decision-making could provide new insights into the biobehavioral mechanisms mediating addiction susceptibility.

Psychological state alterations induced by substance-related physiological mechanisms affect consumer decision-making. We examine the influence of caffeine—the world’s most popular psychostimulant—on the attraction effect. In three double-blinded experiments, we show that caffeine intake via coffee influences consumers’ preference for product options that asymmetrically dominate a decoy option in choice sets (i.e., the attraction effect). Using real products in consequential choice tasks, we show that high caffeine intake (200 mg) is associated with a larger attraction effect both on between-subjects and within-subjects levels and in free-choice as well as forced-choice decision tasks. On the contrary, we do not find support for caffeine’s influence on the attraction effect when considering intermediate levels of caffeine intake (125 mg) and hypothetical decisions. We discuss theoretical implications for context effect research and practical implications for marketers.