Preference Reversal

What is preference reversal?

Preference reversal occurs when two procedures or situations produce opposite rankings of the same options. The term is especially associated with a difference between choosing an option and assigning it a monetary value.

Preference reversal example: choosing versus pricing

In Lichtenstein and Slovic’s 1971 experiments, participants often chose the gamble with a higher probability of winning but placed a higher monetary value on the gamble offering the larger prize. The authors examined three experiments with different bidding and payment arrangements.

Why the distinction matters

A choice and a price can emphasize different attributes. The finding challenges the assumption that the procedures simply reveal the same underlying ranking.

Temporal preference reversals

Changing one’s mind after learning new facts is not the same result. Temporal reversals are another use of the term: for example, a person might prefer a larger later reward while both options are distant, but prefer the smaller sooner reward as it becomes immediate. Such patterns require comparable choices, not merely a change over time.

How to assess a preference reversal

Check that the options, information and incentives are comparable across the two procedures.