Attention and Salience in Preference Reversals

University of Zurich, Department of Economics, Working Paper No. 389

30 Pages Posted: 3 Jun 2021

See all articles by Carlos Alós-Ferrer

Carlos Alós-Ferrer

University of Zurich - Department of Economics

Alexander Ritschel

University of Zurich - Department of Economics

Date Written: June 2021

Abstract

We investigate the implications of Salience Theory for the classical preference reversal phenomenon, where monetary valuations contradict risky choices. It has been stated that one factor behind reversals is that monetary valuations of lotteries are inflated when elicited in isolation, and that they should be reduced if an alternative lottery is present and draws attention. We conducted two preregistered experiments, an online choice study (N = 256) and an eye-tracking study (N = 64), in which we investigated salience and attention in preference reversals, manipulating salience through the presence or absence of an alternative lottery during evaluations. We find that the alternative lottery draws attention, and that fixations on that lottery influence the evaluation of the target lottery as predicted by Salience Theory. The effect, however, is of a modest magnitude and fails to translate into an effect on preference reversal rates in either experiment. We also use transitions (eye movements) across outcomes of different lotteries to study attention on the states of the world underlying Salience Theory, but we find no evidence that larger salience results in more transitions.

Keywords: Preference reversals, eye-tracking, Salience Theory

JEL Classification: D01, D81, D87

Suggested Citation

Alos-Ferrer, Carlos and Ritschel, Alexander, Attention and Salience in Preference Reversals (June 2021). University of Zurich, Department of Economics, Working Paper No. 389, Available at SSRN: https://ssrn.com/abstract=3858824 or http://dx.doi.org/10.2139/ssrn.3858824

Carlos Alos-Ferrer (Contact Author)

University of Zurich - Department of Economics ( email )

Zürich
Switzerland

Alexander Ritschel

University of Zurich - Department of Economics ( email )

Zürich
Switzerland

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