Investigation of the preference-reversal phenomenon in a new product introduction task

Researchers have found a tendency for Ss in gambling situations to reverse their preferences for different types of gambles. That is, Ss tended to choose to play more conservative (low variance) gambles, but to set higher selling prices for riskier (high variance) gambles, despite the bets having equal expected values. The present research investigated this preference-reversal phenomenon in a simulated managerial decision task. In the task, 97 undergraduates had to choose which of 2 products to develop and market as well as set prices for the products. Ss were given estimates of the profits (or losses) that would accrue if the product were a success or a failure and the corresponding probabilities of success and failure. In addition, some Ss made the decisions as individuals, whereas others made the decisions in groups. Results reveal that Ss tended to reverse their preferences but not as frequently as found in the gambling task. Further, results reveal that groups were significantly more prone to the decision bias than individuals. (11 ref) (PsycINFO Database Record (c) 2006 APA, all rights reserved).