(A,f): Choice With Frames
17 Pages Posted: 2 May 2007
Date Written: July 28, 2007
In order to incorporate recent developments in Bounded Rationality and Behavioral Economics into Choice Theory, we introduce the notion of an extended choice problem (A,f) where A is a set of alternatives and f is a frame. A frame consists of observable information that appears to be irrelevant to the rational assessment of the alternatives but nonetheless may affect choice. An extended choice function assigns a chosen element to every extended choice problem. We identify conditions under which there exists either a transitive or a transitive and complete binary relation over the alternatives such that an alternative x is chosen in some extended choice problem (A,f) if and only if x is maximal according to the binary relation in the set A. We then investigate several extended choice models in which behavior cannot be described as the maximization of a complete and transitive relation, or alternatively the binary relation provides little information on how the decision maker chooses from extended choice problems. We comment on the possible welfare interpretations of our results along the paper.
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