Tests of the betweenness property in experimental financial choices

A fundamental property of the expected utility (EU) model, the betweenness property, is tested for insights into which class of model may fit financial choices. The analysis also seeks to identify variables that may explain betweenness property violations. The results indicate that violations of betweenness (nonmonotone orderings) are made frequently, weakening support for choice models dependent upon the betweenness property. The results further suggest that betweenness violations are context-related. Fewer violations are likely in higher risk markets and from subjects who make consistent choices and have lower risk preferences. There is some evidence that higher risk preferences are related to subjects' lack of ability and/or motivation to make consistent choices. Betweenness property violations do not seem related to the presence of sunk costs in choices.