On Rational Choice and the Representation of Decision Problems

Abstract

In economic theory, an agent chooses from available alternatives – modelled as a set. In decisions in the field or in the lab, however, agents do not have access to the set of alternatives at once. Instead, alternatives are represented by the outside world in a structured way. Online search results are lists of items, wine menus are often lists of lists (grouped by type or country), and online shopping often involves filtering items which can be viewed as navigating a tree. Representations constrain how an agent can choose. At the same time, an agent can also leverage representations when choosing, simplifying his choice process. For instance, in the case of a list he can use the order in which alternatives are represented to make his choice.

In this paper, we model representations and choice procedures operating on them. We ask which properties procedures have to fulfill such that their choices are equivalent to maximizing a strict preference relation. We fully characterize such procedures for general representations including lists, list of lists, trees and other representations.

Keywords: Rationalizability, Choice Procedures, Environment

JEL Classification: D01, D03, D00