Preference Reversal And Expert Essay

This essay has a total of 533 words and 2 pages.

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 factor appears to be the
overpricing of the longshot bets. If subjects are actually offered a monetary figure
(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 condition.
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 development of expertise in avoiding preference reversal, then, would have to involve
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