Why contextual preference reversals maximize expected value

Research output: Contribution to journal › Article › peer-review

Standard

Why contextual preference reversals maximize expected value. / Howes, Andrew; Warren, Paul A.; Farmer, George D.; El-Deredy, Wael; Lewis, Richard L.

In: Psychological Review, Vol. 123, No. 4, 07.2016, p. 368-391.

Research output: Contribution to journal › Article › peer-review

Harvard

Howes, A, Warren, PA, Farmer, GD, El-Deredy, W & Lewis, RL 2016, 'Why contextual preference reversals maximize expected value', Psychological Review, vol. 123, no. 4, pp. 368-391. https://doi.org/10.1037/a0039996

APA

Howes, A., Warren, P. A., Farmer, G. D., El-Deredy, W., & Lewis, R. L. (2016). Why contextual preference reversals maximize expected value. Psychological Review, 123(4), 368-391. https://doi.org/10.1037/a0039996

Vancouver

Howes A, Warren PA, Farmer GD, El-Deredy W, Lewis RL. Why contextual preference reversals maximize expected value. Psychological Review. 2016 Jul;123(4):368-391. https://doi.org/10.1037/a0039996

Author

Howes, Andrew ; Warren, Paul A. ; Farmer, George D. ; El-Deredy, Wael ; Lewis, Richard L. / Why contextual preference reversals maximize expected value. In: Psychological Review. 2016 ; Vol. 123, No. 4. pp. 368-391.

Bibtex

@article{414cdff65c454e42b4eb2e9160b24c2b,
title = "Why contextual preference reversals maximize expected value",
abstract = "Contextual preference reversals occur when a preference for one option over another is reversed by the addition of further options. It has been argued that the occurrence of preference reversals in human behavior shows that people violate the axioms of rational choice and that people are not, therefore, expected value maximizers. In contrast, we demonstrate that if a person is only able to make noisy calculations of expected value and noisy observations of the ordinal relations among option features, then the expected value maximizing choice is influenced by the addition of new options and does give rise to apparent preference reversals. We explore the implications of expected value maximizing choice, conditioned on noisy observations, for a range of contextual preference reversal types—including attraction, compromise, similarity, and phantom effects. These preference reversal types have played a key role in the development of models of human choice. We conclude that experiments demonstrating contextual preference reversals are not evidence for irrationality. They are, however, a consequence of expected value maximization given noisy observations. (PsycINFO Database Record (c) 2016 APA, all rights reserved)",
keywords = "expected value maximization, preference reversals, rationality, choice",
author = "Andrew Howes and Warren, {Paul A.} and Farmer, {George D.} and Wael El-Deredy and Lewis, {Richard L.}",
year = "2016",
month = jul,
doi = "10.1037/a0039996",
language = "English",
volume = "123",
pages = "368--391",
journal = "Psychological Review",
issn = "0033-295X",
publisher = "American Psychological Association",
number = "4",

}

RIS

TY - JOUR

T1 - Why contextual preference reversals maximize expected value

AU - Howes, Andrew

AU - Warren, Paul A.

AU - Farmer, George D.

AU - El-Deredy, Wael

AU - Lewis, Richard L.

PY - 2016/7

Y1 - 2016/7

N2 - Contextual preference reversals occur when a preference for one option over another is reversed by the addition of further options. It has been argued that the occurrence of preference reversals in human behavior shows that people violate the axioms of rational choice and that people are not, therefore, expected value maximizers. In contrast, we demonstrate that if a person is only able to make noisy calculations of expected value and noisy observations of the ordinal relations among option features, then the expected value maximizing choice is influenced by the addition of new options and does give rise to apparent preference reversals. We explore the implications of expected value maximizing choice, conditioned on noisy observations, for a range of contextual preference reversal types—including attraction, compromise, similarity, and phantom effects. These preference reversal types have played a key role in the development of models of human choice. We conclude that experiments demonstrating contextual preference reversals are not evidence for irrationality. They are, however, a consequence of expected value maximization given noisy observations. (PsycINFO Database Record (c) 2016 APA, all rights reserved)

AB - Contextual preference reversals occur when a preference for one option over another is reversed by the addition of further options. It has been argued that the occurrence of preference reversals in human behavior shows that people violate the axioms of rational choice and that people are not, therefore, expected value maximizers. In contrast, we demonstrate that if a person is only able to make noisy calculations of expected value and noisy observations of the ordinal relations among option features, then the expected value maximizing choice is influenced by the addition of new options and does give rise to apparent preference reversals. We explore the implications of expected value maximizing choice, conditioned on noisy observations, for a range of contextual preference reversal types—including attraction, compromise, similarity, and phantom effects. These preference reversal types have played a key role in the development of models of human choice. We conclude that experiments demonstrating contextual preference reversals are not evidence for irrationality. They are, however, a consequence of expected value maximization given noisy observations. (PsycINFO Database Record (c) 2016 APA, all rights reserved)

KW - expected value maximization

KW - preference reversals

KW - rationality

KW - choice

U2 - 10.1037/a0039996

DO - 10.1037/a0039996

M3 - Article

VL - 123

SP - 368

EP - 391

JO - Psychological Review

JF - Psychological Review

SN - 0033-295X

IS - 4

ER -