Stochastic Choice and Consideration Sets

35 Pages Posted: 20 Oct 2012

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 London - School of Economics and Finance

Abstract

We model a boundedly rational agent who suffers from limited attention. The agent considers each feasible alternative with a given (unobservable) probability, the attention parameter, and then chooses the alternative that maximises a preference relation within the set of considered alternatives. Both the preference and the attention parameters are identified uniquely by stochastic choice data. The model is the only one for which the impact of removing any alternative a on the choice probability of any other alternative b is non-negative, asymmetric (either a impacts b or vice-versa), menu independent, neutral (the same on any alternative in the menu), and consistent with the impacts on a and b by a common third alternative.

Keywords: discrete choice, random utility, logit model, consideration sets, bounded rationality, revealed preferences

JEL Classification: D0

Suggested Citation

Manzini, Paola and Mariotti, Marco, Stochastic Choice and Consideration Sets. IZA Discussion Paper No. 6905. Available at SSRN: https://ssrn.com/abstract=2164634

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 London - School of Economics and Finance ( email )

Mile End Road
London, E1 4NS
United Kingdom

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