Choice Aversion in Directed Networks

Abstract

This paper studies the problem of optimal path selection in a directed network by decision makers that have an intrinsic distaste for evaluating too many options. We propose a recursive logit model that incorporates choice aversion along the lines introduced by Fudenberg and Strzalecki (2015). We derive optimal flow allocations both sequentially and from a path-choice perspective, which is robust to the presence of overlapping routes. We obtain a tight characterization of welfare in terms of both the network topology and the degree of choice aversion, where we derive comparative statics consistent with previous research.

Keywords: choice aversion, discrete choice models, directed networks

JEL Classification: D001, C00, C51, C61