The Becker-DeGroot-Marschak Mechanism and Nonexpected Utility: A Testable Approach.

The Becker-DeGroot-Marschak mechanism is widely used to elicit decisionmakers' selling prices of lotteries. This mechanism leads, however, to the preference reversal phenomenon, which seemed to indicate nontransitive preferences. To solve this puzzle, Karni and Safra (1987) introduced a new interpretation of this mechanism based on two-stage lotteries without the independent axiom. In this article, we suggest a set of empirically testable hypotheses based on their interpretation of the mechanism. One of these tests can be used to find the utility and the probability transformation functions of an anticipated utility maximizer. Copyright 1990 by Kluwer Academic Publishers