We propose a regret-based model that allows the separation of attitudes towards transitivity on triples of random variables that are close to each other and attitudes towards transitivity on triples that are far apart. This enables a theoretical reinterpretation of evidence related to intransitive behavior in the laboratory. When viewed through this paper’s analysis, the experimental evidence need not imply intransitive behavior for large risky decisions such as investment choices and insurance.
- Local preferences
- Preference reversal