51 Pages Posted: 27 Apr 2017 Last revised: 23 May 2017
Date Written: May 11, 2017
A key assumption in the empirical application of rational decision theory is that of procedure invariance; preferences are independent of how they are elicited. This means that measuring preferences among a bundle of goods should yield the same ordinal rankings, regardless of whether preferences are measured using a valuation strategy (e.g., willingness-to-pay) or choices. In 13 studies the authors demonstrate violations of procedure invariance, such that consumers more strongly prefer affective over functional goods in choices as compared to willingness-to-pay. These preference reversals result from a combination of two processes. The first is that decision-makers are more likely to rely on affect when making a choice. The second is that they place a relatively greater weight on both the long-term value of a product and its necessity when indicating their willingness to pay, while placing a relatively greater weight on instant gratification and wants when making choices. Contrary to the necessary empirical assumption that preferences are consistent across measurements, the authors find that participants treat different measurement techniques as entirely different situations.
Keywords: Preferences, Choice, Willingness to Pay, Framing, Preference Reversals
Suggested Citation: Suggested Citation
O'Donnell, Michael and Evers, Ellen R.K., Elicitation-Based Preference Reversals in Consumer Goods (May 11, 2017). Available at SSRN: https://ssrn.com/abstract=2959609