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.
Highlights
Models of Preference ReversalsWe focus in what follows on models of human preference reversals in consumer product choice and gamble experiments
The reason that the model predicts these contextual preference reversal effects is that making preference reversals, when observations are noisy, is an implication of expected value maximizing choice
There is no sense in which making preference reversals reveals a change in preferences, once it is understood that the choice tasks in these experiments are choices with uncertainty about expected value
Summary
We focus in what follows on models of human preference reversals in consumer product choice and gamble experiments. 388) state that attraction effect reversals naturally follow from the extended theory Another neuro-computational process model, the Leaky Competing Accumulator (LCA; Usher & McClelland, 2001) is a model of perceptual choice and, as with DFT, it has been applied to the problem of explaining contextual preference reversals (Usher et al, 2008). Contextual preference reversals have been taken as strong evidence that human decision making processes do not conform to key axioms present in normative theories of rational choice This observation has led to a prevalent view that preference reversals indicate that value maximization approaches cannot be used to explain behavior (Tversky & Simonson, 1993). Thereby, we provide an analysis of why neural cognitive-neural information processing models should exhibit these effects
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