Do preference reversals generalise? Results on ambiguity and loss aversion

Preference reversals are frequently observed in the lab, but almost all designs use completely transparent prospects, which are rarely features of decision making elsewhere. This raises questions of external validity. We test the robustness of the phenomenon to gambles which incorporate realistic ambiguity in payoffs and probabilities. In addition, we test a recent rationalisation of preference reversals by Third Generation Prospect Theory, which would also restrict the incidence of reversals outside the lab. According to this account, reversals occur largely because the selling protocol generally used for the valuation task activates loss aversion, which is excluded by the free gift protocol of the choice task. We find that reversals are not dependent on these procedures, though they seem to be encouraged by transparency.