Preference Reversal And Expert :: essays research papers

Subjects in gambling tasks that involve some(prenominal) mouthful and pricing show a pattern of responses known as alternative reversal. That is, although subjects in a choice civilize generally will arrest higher alternative ratings to &8220safe, high-probability/low- offspring, bets than to &8220longshot, low-probability/high- output, bets, when they be asked in a pricing condition to generate an summate of money that they would accept to avoid the gamble altogether they tend to give higher values for longshots oer safer bets. Tversky, Slovic, and Kahneman (1990) demonstrate that among the several manageable actions that subjects could be taking to produce this pattern, the full of life factor appears to be the oerpricing of the longshot bets. If subjects are actually offered a monetary think (hypothetically) by the experimenter to replace the gamble, they will accept this figure even though it is lower than the figure that they generated in the pricing conditio n. Tversky et al. (1990) further showed that this overpricing is largely due to a phenomena known as scale compatibility, which involves certain biases when the response required by the subject is in the same units as the 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 learning 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 materialise of any payoff in both the choice and pricing c ondition 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 susceptible to preference reversals in the other direction. In the first case of maximizing the put on the line of payoff, the safe bet (H) would be favored over the longshot (L) and the pricing would too favor the safe bet (Ch) over the longshot (Cl) (i.e. Ch Cl). Yet when any amount of money (X) is offered at a %100 probability, that option would be selected over both H and L.