A Salience Theory of Choice Errors
30 Pages Posted: 15 Apr 2010
There are 2 versions of this paper
A Salience Theory of Choice Errors
A Salience Theory of Choice Errors
Date Written: April 2010
Abstract
We study a psychologically based foundation for choice errors. The decision maker applies a preference ranking after forming a 'consideration set' prior to choosing an alternative. Membership of the consideration set is determined both by the alternative specific salience and by the rationality of the agent (his general propensity to consider all alternatives). The model turns out to include a logit formulation as a special case. In general, it has a rich set of implications both for exogenous parameters and for a situation in which alternatives can affect their own salience (salience games). Such implications are relevant to assess the link between 'revealed' preferences and 'true' preferences: for example, less rational agents may paradoxically express their preference through choice more truthfully than more rational agents.
Keywords: Discrete choice, Random utility, Logit model, Consideration sets, bounded rationality
JEL Classification: D0
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Consideration Sets and Competitive Marketing
By Kfir Eliaz and Ran Spiegler
-
Optimal Price Setting with Observation and Menu Costs
By Fernando Alvarez, Francesco Lippi, ...
-
On the Strategic Use of Attention Grabbers
By Kfir Eliaz and Ran Spiegler
-
A Salience Theory of Choice Errors
By Paola Manzini and Marco Mariotti
-
Ich Bin Auch Ein Lemming: Herding and Consumption Capital in Arts and Culture
By Bruno S. Frey, Dominic Rohner, ...
-
Ordients: Optimization and Comparative Statics without Utility Functions
By Ludovic Renou and Karl H. Schlag
-
Bounded Rationality as Subjective Menus: Contraction Consistency and Intertemporal Choice
By Dean Spears
-
By Mauro Papi