Time Preference and Preference Reversal among Experienced Subjects: The Effects of Real Payments.

Preference reversal has been frequent in tests with hypothetical, or small real, payoffs concerning lotteries as well as claims redeemable at different future dates. Preference reversal is tested here for the latter case with nontrivial payment levels and subjects likely to deal with decisions of this type. It is found that replacing hypothetical by real-payment tests reduces preference reversal rates from 62 percent to 15 percent for subjects 'predicted' to reverse preferences and that the real overall preference reversal rate (before correcting for response errors) is 19 percent , much lower than in earlier studies. Copyright 1994 by Royal Economic Society.