Are Preference Reversals Due to Decision Contexts or Elicitation Procedures? A Theoretical Reconciliation

Abstract

Preference reversals across decision contexts (e.g., acquisition versus forfeiture) and elicitation procedures (e.g., choice versus willingness-to-pay; WTP) provide foundational evidence that consumers’ preferences are constructed––not revealed––in the decision-making process. We examine the interplay of decision context and elicitation effects. We find that preference reversals are mostly driven by decision context effects on choice, not on preference elicitations requiring monetary valuation, like WTP. In three classic paradigms––intertemporal tradeoffs, acquisition versus forfeiture, and the attraction effect––decision-context effects more often induced preference reversals when preferences were elicited through choice than when preferences were elicited through Willingness-to-Pay or Willingness-to-Accept (WTP/WTA), even with real money at stake. Preference reversals between decision contexts were less prevalent in WTP/WTA than in choice because attribute compatibility effects made market relevant attributes, that is, value relevant information, more salient and weighted heavily in WTP/WTA than in choice. The results (eight experiments; N=3,544) change our understanding of preference reversals and challenge the use of choice as the gold standard for preference elicitation.