Economic Theory of Choice and the Preference Reversal Phenomenon

Abstract

A body of data and theory has been developing
\nwithin psychology which should be of
\ninterest to economists. Taken at face value the
\ndata are simply inconsistent with preference
\ntheory and have broad implications about
\nresearch priorities within economics. The
\ninconsistency is deeper than the mere lack of
\ntransitivity or even stochastic transitivity. It
\nsuggests that no optimization principles of
\nany sort lie behind even the simplest of human
\nchoices and that the uniformities in human
\nchoice behavior which lie behind market
\nbehavior may result from principles which are
\nof a completely different sort from those
\ngenerally accepted. This paper reports the
\nresults of a series of experiments designed to
\ndiscredit the psychologists' works as applied
\nto economics.