Advanced Search
MyIDEAS: Login to save this article or follow this journal

Extending the Bounds of Rationality: Evidence and Theories of Preferential Choice

Contents:

Author Info

  • J�rg Rieskamp
  • Jerome R. Busemeyer
  • Barbara A. Mellers

Abstract

Most economists define rationality in terms of consistency principles. These principles place ?bounds? on rationality?bounds that range from perfect consistency to weak stochastic transitivity. Several decades of research on preferential choice has demonstrated how and when people violate these bounds. Many of these violations are interconnected and reflect systematic behavioral principles. We discuss the robustness of the violations and review the theories that are able to predict them. We further discuss the adaptive functions of the violations. From this perspective, choices do more than reveal preferences; they also reflect subtle, yet often quite reasonable, dependencies on the environment.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jel.44.3.631
Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 44 (2006)
Issue (Month): 3 (September)
Pages: 631-661

as in new window
Handle: RePEc:aea:jeclit:v:44:y:2006:i:3:p:631-661

Note: DOI: 10.1257/jel.44.3.631
Contact details of provider:
Email:
Web page: http://www.aeaweb.org/journal
More information through EDIRC

Order Information:
Web: http://www.aeaweb.org/subscribe.html

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
  2. Slovic, Paul & Lichtenstein, Sarah, 1983. "Preference Reversals: A Broader Perspective," American Economic Review, American Economic Association, vol. 73(4), pages 596-605, September.
  3. Brownstone, David & Train, Kenneth, 1999. "Forecasting new product penetration with flexible substitution patterns," University of California Transportation Center, Working Papers qt3tb6j874, University of California Transportation Center.
  4. John Leland, 2010. "Generalized Similarity Judgments: An Alternative Explanation for Choice Anomalies," Levine's Working Paper Archive 7644, David K. Levine.
  5. Heath, Timothy B & Chatterjee, Subimal, 1995. " Asymmetric Decoy Effects on Lower-Quality versus Higher-Quality Brands: Meta-analytic and Experimental Evidence," Journal of Consumer Research, University of Chicago Press, vol. 22(3), pages 268-84, December.
  6. McFadden, Daniel, 1999. "Rationality for Economists?," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 73-105, December.
  7. Schoemaker, Paul J H, 1982. "The Expected Utility Model: Its Variants, Purposes, Evidence and Limitations," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 529-63, June.
  8. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  9. James Levinsohn & Steven Berry & Ariel Pakes, 1999. "Voluntary Export Restraints on Automobiles: Evaluating a Trade Policy," American Economic Review, American Economic Association, vol. 89(3), pages 400-430, June.
  10. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
  11. Hausman, Jerry A & Wise, David A, 1978. "A Conditional Probit Model for Qualitative Choice: Discrete Decisions Recognizing Interdependence and Heterogeneous Preferences," Econometrica, Econometric Society, vol. 46(2), pages 403-26, March.
  12. Prelec, Drazen & Wernerfelt, Birger & Zettelmeyer, Florian, 1997. " The Role of Inference in Context Effects: Inferring What You Want from What Is Available," Journal of Consumer Research, University of Chicago Press, vol. 24(1), pages 118-25, June.
  13. Wernerfelt, Birger, 1995. " A Rational Reconstruction of the Compromise Effect: Using Market Data to Infer Utilities," Journal of Consumer Research, University of Chicago Press, vol. 21(4), pages 627-33, March.
  14. Huber, Joel & Payne, John W & Puto, Christopher, 1982. " Adding Asymmetrically Dominated Alternatives: Violations of Regularity and the Similarity Hypothesis," Journal of Consumer Research, University of Chicago Press, vol. 9(1), pages 90-98, June.
  15. Rubinstein, Ariel, 1988. "Similarity and decision-making under risk (is there a utility theory resolution to the Allais paradox?)," Journal of Economic Theory, Elsevier, vol. 46(1), pages 145-153, October.
  16. Camerer, Colin F, 1989. " An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 61-104, April.
  17. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
  18. David Hensher & William Greene, 2003. "The Mixed Logit model: The state of practice," Transportation, Springer, vol. 30(2), pages 133-176, May.
  19. Schmidt, Peter & Strauss, Robert P, 1975. "Estimation of Models with Jointly Dependent Qualitative Variables: A Simultaneous Logit Approach," Econometrica, Econometric Society, vol. 43(4), pages 745-55, July.
  20. Huber, Joel & Puto, Christopher, 1983. " Market Boundaries and Product Choice: Illustrating Attraction and Substitution Effects," Journal of Consumer Research, University of Chicago Press, vol. 10(1), pages 31-44, June.
  21. Wakker, Peter & Erev, Ido & Weber, Elke U, 1994. "Comonotonic Independence: The Critical Test between Classical and Rank-Dependent Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 9(3), pages 195-230, December.
  22. Green, Jerry R & Jullien, Bruno, 1989. " Ordinal Independence in Nonlinear Utility Theory: Erratum," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 119, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Pavlo Blavatskyy, 2014. "Stronger utility," Theory and Decision, Springer, vol. 76(2), pages 265-286, February.
  2. Manzini, Paola & Mariotti, Marco, 2012. "Stochastic Choice and Consideration Sets," IZA Discussion Papers 6905, Institute for the Study of Labor (IZA).
  3. Michele Lombardi, 2007. "Reason-Based Choice Correspondences," Working Papers 607, Queen Mary, University of London, School of Economics and Finance.
  4. Amélie Vrijdags, 2010. "An experimental investigation of transitivity in set ranking," Theory and Decision, Springer, vol. 68(1), pages 213-232, February.
  5. Khalil, Elias L., 2010. "The Bayesian fallacy: Distinguishing internal motivations and religious beliefs from other beliefs," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 268-280, August.
  6. Blavatskyy, Pavlo, 2013. "Which decision theory?," Economics Letters, Elsevier, vol. 120(1), pages 40-44.
  7. Khalil, Elias, 2008. "The Bayesian Fallacy: Distinguishing Four Kinds of Beliefs," MPRA Paper 8474, University Library of Munich, Germany, revised 26 Apr 2008.
  8. J�rg Rieskamp, 2008. "The importance of learning when making inferences," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 3, pages 261-277, March.
  9. Egbert, Henrik & Mengov, George, 2009. "Satisfaction and Disappointment in Consumer Choices," MPRA Paper 55595, University Library of Munich, Germany.
  10. Thomas Otter & Joe Johnson & Jörg Rieskamp & Greg Allenby & Jeff Brazell & Adele Diederich & J. Hutchinson & Steven MacEachern & Shiling Ruan & Jim Townsend, 2008. "Sequential sampling models of choice: Some recent advances," Marketing Letters, Springer, vol. 19(3), pages 255-267, December.
  11. Clintin P. Davis-Stober & Nicholas Brown, 2011. "A shift in strategy or "error"? Strategy classification over multiple stochastic specifications," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 6(8), pages 800-813, December.
  12. Gowdy, John M., 2007. "Toward an experimental foundation for benefit-cost analysis," Ecological Economics, Elsevier, vol. 63(4), pages 649-655, September.
  13. Di Caprio, Debora & Santos-Arteaga, Francisco J., 2011. "Cardinal versus ordinal criteria in choice under risk with disconnected utility ranges," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 588-594.
  14. Silver, Steven D. & Verbrugge, Randal, 2010. "Home production and endogenous economic growth," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 297-312, August.
  15. John M. Gowdy, 2010. "Behavioral economics, neuroeconomics, and climate change policy: baseline review for the garrison institute initiative on climate change," Rensselaer Working Papers in Economics 1010, Rensselaer Polytechnic Institute, Department of Economics.
  16. John M. Gowdy, 2007. "Behavioral Economics and Climate Change Policy," Rensselaer Working Papers in Economics 0701, Rensselaer Polytechnic Institute, Department of Economics.
  17. Mohammed Abdellaoui & Han Bleichrodt & Olivier l’Haridon, 2013. "Sign-dependence in intertemporal choice," Journal of Risk and Uncertainty, Springer, vol. 47(3), pages 225-253, December.
  18. Brown, Thomas C. & Kingsley, David & Peterson, George L. & Flores, Nicholas E. & Clarke, Andrea & Birjulin, Andrej, 2008. "Reliability of individual valuations of public and private goods: Choice consistency, response time, and preference refinement," Journal of Public Economics, Elsevier, vol. 92(7), pages 1595-1606, July.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aea:jeclit:v:44:y:2006:i:3:p:631-661. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.