We consider the psychological effect of preference reversal and show that it finds a natural explanation in the frame of quantum decision theory. When people choose between lotteries with non-negative payoffs, they prefer a more certain lottery because of uncertainty aversion. But when people evaluate lottery prices, e.g., for selling to others the right to play them, they do this more rationally, being less subject to behavioral biases. This difference can be explained by the presence of the attraction factors entering the expression of quantum probabilities. Only the existence of attraction factors can explain why, considering two lotteries with close utility factors, a decision maker prefers one of them when choosing, but evaluates higher the other one when pricing. We derive a general quantitative criterion for the preference reversal to occur that relates the utilities of the two lotteries to the attraction factors under choosing vs. pricing and test successfully its application on experiments by Tversky et al. We also show that the planning paradox can be treated as a kind of preference reversal.
This research output has an Altmetric Attention Score of 1. This is our high-level measure of the quality and quantity of online attention that it has received. This Attention Score, as well as the ranking and number of research outputs shown below, was calculated when the research output was last mentioned on 08 October 2015.
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