Preference Reversals and the Measurement of Environmental Values

15 Pages Posted: 11 Feb 2009

See all articles by Julie R. Irwin

Julie R. Irwin

University of Texas - McCombs School of Business

Paul Slovic

Decision Research; University of Oregon - Department of Psychology

Sarah Lichtenstein

Decision Research

Gary McClelland

University of Colorado at Boulder - Department of Psychology

Date Written: January 1, 1993

Abstract

Numerous studies have demonstrated that theoretically equivalent measures of preference, such as choices and prices, can lead to systematically different preference orderings, known as preference reversals. Two major causes of preference reversals are the compatibility effect and the prominence effect. The present studies demonstrate that the combined effects of prominence and compatibility lead to predictable preference reversals in settings where improvements in air quality are compared with improvements in consumer commodities by two methods - willingness to pay for each improvement and choice (For which of the two improvements would you pay more? Which improvement is more valuable to you?). Willingness to pay leads to relatively greater preference for improved commodities; choice leads to relatively greater preference for improved air quality. These results extend the domain of preference reversals and pose a challenge to traditional theories of preference. At the applied level, these findings indicate the need to develop new methods for valuing environmental resources.

Keywords: behavioral economics, preference reversals, decision making, context effects, environmental values, compatibility, willingness to pay

JEL Classification: C91, D12

Suggested Citation

Irwin, Julie R. and Slovic, Paul and Lichtenstein, Sarah and McClelland, Gary, Preference Reversals and the Measurement of Environmental Values (January 1, 1993). Journal of Risk and Uncertainty, Vol. 6, No. 1, 1993. Available at SSRN: https://ssrn.com/abstract=1340208

Julie R. Irwin (Contact Author)

University of Texas - McCombs School of Business ( email )

Business,Government and Society Department
Austin, TX 78712
United States

Paul Slovic

Decision Research ( email )

1201 Oak Street, Suite 200
Eugene, OR 97401
United States
541-485-2400 (Phone)
541-485-2403 (Fax)

HOME PAGE: http://www.decisionresearch.org

University of Oregon - Department of Psychology ( email )

Eugene, OR 97403
United States
541-485-2400 (Phone)

Sarah Lichtenstein

Decision Research ( email )

1201 Oak Street, Suite 200
Eugene, OR 97401
United States

Gary McClelland

University of Colorado at Boulder - Department of Psychology ( email )

Boulder, 80309
United States

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