Predictably Intransitive Preferences

49 Pages Posted: 17 Apr 2016 Last revised: 21 May 2016

See all articles by David Butler

David Butler

Murdoch University

Ganna Pogrebna

Columbia University

Pavlo R. Blavatskyy

Montpellier Business School

Date Written: April 11, 2016

Abstract

The transitivity axiom is common to nearly all descriptive and normative utility theories of choice under risk. Recent experiments claim to show observed intransitive preference cycles are no more than noise. We take issue with this consensus position and its normative defence of transitivity. We draw upon the ‘Steinhaus-Trybula paradox’ as a recipe to bespoke design pairs of lotteries over which preferences might cycle. We run an experiment to look for cycles and transitivity’s implication of expansion/contraction consistency between binary and ternary choice sets. Even after considering possible stochastic but transitive explanations, we find cycles can be the modal preference pattern over these simple lotteries and also find systematic violations of expansion/contraction consistency. We conclude with a defence of these preferences, including a novel argument against the money pump.

JEL Classification: C91, D03, D81

Suggested Citation

Butler, David and Pogrebna, Ganna and Blavatskyy, Pavlo R., Predictably Intransitive Preferences (April 11, 2016). Available at SSRN: https://ssrn.com/abstract=2763345 or http://dx.doi.org/10.2139/ssrn.2763345

David Butler (Contact Author)

Murdoch University ( email )

South Street
Murdoch 6150, Western Australia
Australia

Ganna Pogrebna

Columbia University ( email )

419 Schermerhorn Hall
New York, NY 10027
United States

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

Pavlo R. Blavatskyy

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

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