Preference Reversal in Risky Choices Under Time Pressure

Posted: 22 Mar 2009 Last revised: 4 Sep 2011

See all articles by Najam Saqib

Najam Saqib

Ryerson University

Eugene Y. Chan

University of Technology, Sydney

Date Written: March 13, 2010

Abstract

A pervasive aspect of time pressure is the salience of negative information, which causes individuals to adopt strategies that are consistent with risk-aversion. In four studies, however, we find that time pressure reverses risk preferences: risk-seeking individuals adopt risk-averse strategies whereas risk-averse individuals adopt risk-seeking ones. Study 1 demonstrates the basic effect, while Studies 2 and 3 explore the emphasis on negative (vs. positive) outcomes as the underlying mediator. Study 4 extends the findings to the domain of regulatory focus. Taken together, the four studies reveal the existence of a preference reversal in risky choices under time pressure, in direct contrast to the extant understanding of time pressure and decision-making. Consequences for everyday decision-making and consumers are discussed.

Keywords: risk preference, time pressure, preference reversal, loss aversion, regulatory focus

JEL Classification: Z00

Suggested Citation

Saqib, Najam and Chan, Eugene Y., Preference Reversal in Risky Choices Under Time Pressure (March 13, 2010). Available at SSRN: https://ssrn.com/abstract=1365632

Najam Saqib

Ryerson University ( email )

350 Victoria Street
Toronto, Ontario M5B 2K3
Canada

Eugene Y. Chan (Contact Author)

University of Technology, Sydney ( email )

P. O. Box 123
Broadway, NSW 2007
Australia
+61 (2) 9514 3538 (Phone)
+61 (2) 9514 3535 (Fax)

HOME PAGE: http://www.ehchan.com

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