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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2006-10




Michael H. Birnbaum, Ulrich Schmidt




Empirical Tests of Intransitivity Predicted by Models of Risky Choice
Abstract Recently proposed models of risky choice imply systematic violations of transitivity of preference. Five studies explored whether people show patterns of intransitivity predicted by four descriptive models. To distinguish “true” violations from those produced by “error,” a model was fit in which each choice can have a different error rate and each person can have a different pattern of true preferences that need not be transitive. Error rate for a choice is estimated from preference reversals between repeated presentations of the same choice. Results of five studies showed that very few people repeated intransitive patterns. We can retain the hypothesis that transitivity best describes the data of the vast majority of participants.

Keywords: decision making, errors, gambling effect, reference points, regret, transitivity

JEL classification: C91, D81




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