A Salience Theory of Choice Errors

30 Pages Posted: 15 Apr 2010

See all articles by Paola Manzini

Paola Manzini

University of St. Andrews - School of Economics and Finance; Institute for the Study of Labor (IZA)

Marco Mariotti

University of St. Andrews - School of Economics and Finance

Multiple version iconThere are 2 versions of this paper

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

Manzini, Paola and Mariotti, Marco, A Salience Theory of Choice Errors (April 2010). Available at SSRN: https://ssrn.com/abstract=1589482 or http://dx.doi.org/10.2139/ssrn.1589482

Paola Manzini (Contact Author)

University of St. Andrews - School of Economics and Finance ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

HOME PAGE: http://www.st-andrews.ac.uk/~pm210/

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Marco Mariotti

University of St. Andrews - School of Economics and Finance ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

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