Contextual Deliberation and the Choice-Valuation Preference Reversals

Revealed preferences between lotteries can be asymmetrically reversed across choice and valuation. The ongoing debate is whether the procedure-invariance principle is violated. This research presents a parsimonious theory to reconcile asymmetric preference reversals with procedure invariance. When risk attitude is ex ante imperfectly known, preference-eliciting procedures can endogenously influence revealed preferences through affecting the incentive for information retrieval/acquisition (i.e., deliberation). As predicted, when lottery pairing was known, experiment participants exhibited substantially less asymmetric reversals by stating mean-preserving and more dispersed valuations. Therefore, the endogeneity of asymmetric preference reversals can be substantiated.