The circular preferences that go against the axioms of utility theory, and which are Dutch book exploitable, are not of the kind "I prefer A to B at time t1 and B to A at time t2", like the ones of your example. They are more like "I prefer A to B and B to C and C to A, all at the same time".
The couple, if they had to pay a third party a cent to get undressed and then a cent to get dressed, would probably do it and consider it worth it---they end up two cents short but having had an enjoyable experience. Nothing irrational about that. To someone with the other "bad" kind of circular preferences, we can offer a sequence of trades (first A for B and a cent, then C for A and a cent, then B for C and a cent) after which they end up three cents short but otherwise exactly as they started (they didn't actually obtain enjoyable experiences, they made all the trades before anything happened). It is difficult to consider this rational.
Okay. But that still makes it sound like there would almost never be actual real-life cases where you could clearly say that the person exhibited circular preferences? At least I can't think of any real-life scenario that would be an example of the way you define "bad" circular preferences.
Haven't had one of these for awhile. This thread is for questions or comments that you've felt silly about not knowing/understanding. Let's try to exchange info that seems obvious, knowing that due to the illusion of transparency it really isn't so obvious!