ABSTRACT
The economic analysis of environmental policy requires a thorough understanding and appreciation of the ways in which people make decisions towards certain or risky events. Traditional environmental economic policy analyses have relied almost exclusively on the assumption that people are capable of and in fact do make rational decisions. In an unpublished draft manuscript, J. Shogren (2005) puts the problem succinctly: “Relying on rational theory to guide environmental valuation and policy makes more sense if people make, or act as if they make, consistent and systematic choices toward certain and risky events.” Here, we focus on one particularly troubling individual decision making anomaly: preference reversals.
