The Choice Environment, Constraints, and Rational Procedures

Abstract

In decision theory a choice problem is abstractly represented as a set of alternatives. But when facing a concrete choice, an agent typically cannot access this set at once. For instance, when buying online, he needs to navigate a search result in multiple steps, manually clicking to move from page to page. An agent’s choice procedure has to respect this constraint.

In this paper we develop a theory of constraints imposed by the environment and of choice procedures operating on them. We ask which properties procedures have to fulfill such that their choices can equivalently be understood as a maximization of a rational preference relation when the constraints are ignored. We fully characterize such procedures and establish that they are linked to well known properties such as Sen’s α. What is more, we show that there exist purely procedural properties that are sufficient for a rationalization.

Keywords: Rationalizability, Choice Procedures, Environment

JEL Classification: D01, D03, D00