The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Preference Reversals

  • Chris Starmer
Reference work entry


Preference reversal is a widely observed behavioural tendency for the preference ordering of a pair of alternatives to depend on the process used to elicit it. The phenomenon appears to be both a robust and a systematic departure from conventional preference theory. Competing theoretical explanations variously interpret it as a violation of procedure invariance (the presumption that preferences should be independent of the method of eliciting them); a failure of transitivity; or a consequence of loss-averse (and reference-dependent) preferences. This article discusses these interpretations, the related evidence, and reflects on some of the broader implications of the phenomenon.


Allais paradox Decision processes Expected utility hypothesis Expected utility theory Intransitivity Loss aversion Preference reversal Preferences Procedure invariance Regret Savage’s subjective expected hypothesis 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Becker, G.M., M.H. DeGroot, and J. Marschak. 1964. Measuring utility by a single-response sequential method. Behavioral Science 9: 226–232.CrossRefGoogle Scholar
  2. Braga, J., and C. Starmer. 2005. Preference anomalies, preference elicitation and the discovered preference hypothesis. Environmental and Resource Economics 32: 55–89.CrossRefGoogle Scholar
  3. Chu, Y.P., and R.L. Chu. 1990. The subsidence of preference reversals in simplified and marketlike experimental settings: A note. The American Economic Review 80: 902–911.Google Scholar
  4. Cox, J.C., and D.M. Grether. 1996. The preference reversal phenomenon: Response mode, markets and incentives. Economic Theory 7: 381–405.CrossRefGoogle Scholar
  5. Cubitt, R.P., A. Munro, and C. Starmer. 2004. Testing explanations of preference reversal. The Econometrics Journal 114: 709–726.Google Scholar
  6. Grether, D., and C.R. Plott. 1979. Economic theory of choice and the preference reversal phenomenon. The American Economic Review 69: 623–638.Google Scholar
  7. Holt, C.A. 1986. Preference reversals and the independence axiom. The American Economic Review 76: 508–515.Google Scholar
  8. Karni, E., and Z. Safra. 1987. “Preference reversal” and the observability of preferences by experimental methods. Econometrica 55: 675–685.CrossRefGoogle Scholar
  9. Lichtenstein, S., and P. Slovic. 1971. Reversals of preferences between bids and choices in gambling decisions. Journal of Experimental Psychology 89: 46–55.CrossRefGoogle Scholar
  10. Lichtenstein, S., and P. Slovic. 2006. The construction of preference. New York: Cambridge University Press.CrossRefGoogle Scholar
  11. Lindman, H.R. 1971. Inconsistent preferences among gambles. Journal of Experimental Psychology 89: 390–397.CrossRefGoogle Scholar
  12. Loomes, G.C., and R. Sugden. 1982. Regret theory: An alternative theory of rational choice under uncertainty. The Econometrics Journal 92: 805–824.Google Scholar
  13. Loomes, G.C., and R. Sugden. 1983. A rationale for preference reversal. The American Economic Review 73: 428–432.Google Scholar
  14. Loomes, G., C. Starmer, and R. Sugden. 1991. Observing violations of transitivity by experimental methods. Econometrica 59: 425–439.CrossRefGoogle Scholar
  15. Pommerehne, W.W., F. Schneider, and P. Zweifel. 1982. Economic theory of choice and the preference reversal phenomenon: A re-examination. The American Economic Review 73: 569–574.Google Scholar
  16. Reilly, R.J. 1982. Preference reversal: Further evidence and some suggested modifications in experimental design. The American Economic Review 73: 576–584.Google Scholar
  17. Savage, L. 1954. The foundations of statistics. New York: Wiley.Google Scholar
  18. Segal, U. 1988. Does the preference reversal phenomenon necessarily contradict the independence axiom? The American Economic Review 78: 233–236.Google Scholar
  19. Seidl, C. 2002. Preference reversal. Journal of Economic Surveys 6: 621–655.CrossRefGoogle Scholar
  20. Starmer, C.V. 2000. Developments in non-expected utility theory: The hunt for a descriptive theory of choice under risk. Journal of Economic Literature 38: 332–382.CrossRefGoogle Scholar
  21. Starmer, C., and R. Sugden. 1998. Testing alternative explanations of cyclical choices. Economica 65: 259–347.CrossRefGoogle Scholar
  22. Sugden, R. 2003. Reference-dependent subjective expected utility. Journal of Economic Theory 111: 172–191.CrossRefGoogle Scholar
  23. Tversky, A., S. Sattath, and P. Slovic. 1988. Contingent weighting in judgement and choice. Psychological Review 95: 371–384.CrossRefGoogle Scholar
  24. Tversky, A., P. Slovic, and D. Kahneman. 1990. The causes of preference reversal. The American Economic Review 80: 204–217.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Chris Starmer
    • 1
  1. 1.