A salience theory of choice errors

Paola Manzini, Marco Mariotti

    Research output: Working paper

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    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 speci?c 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 a¤ect 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.
    Original languageEnglish
    PublisherUniversity of St Andrews
    Number of pages30
    Publication statusPublished - Apr 2010

    Publication series

    NameSchool of Economics & Finance Discussion Paper
    PublisherUniversity of St Andrews
    No.1003
    ISSN (Print)0962-4031
    ISSN (Electronic)2055-303X

    Keywords

    • discrete choice
    • random utility
    • logit model
    • consideration sets
    • bounded rationality

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