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Satisficing and maximizing consumers in a monopolistic screening model

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  • Papi, Mauro
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    Abstract

    We study a simple model in which a monopolist supplies a multi-attribute good and does not know whether the consumer is an expected-utility maximizer or a boundedly rational type that follows the satisficing heuristic proposed by Herbert Simon. We find that, unless the probability of the consumer being fully rational is sufficiently high, the fact that a boundedly rational consumer never exchanges satisfactory with unsatisfactory alternatives implies that he/she never ends up with an alternative strictly better than his/her aspiration levels.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165489613000760
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    Bibliographic Info

    Article provided by Elsevier in its journal Mathematical Social Sciences.

    Volume (Year): 66 (2013)
    Issue (Month): 3 ()
    Pages: 385-389

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    Handle: RePEc:eee:matsoc:v:66:y:2013:i:3:p:385-389

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    Web page: http://www.elsevier.com/locate/inca/505565

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    1. Spiegler, Ran, 2014. "Bounded Rationality and Industrial Organization," OUP Catalogue, Oxford University Press, number 9780199334261.
    2. Parag A. Pathak & Tayfun Sonmez, 2008. "Leveling the Playing Field: Sincere and Sophisticated Players in the Boston Mechanism," American Economic Review, American Economic Association, vol. 98(4), pages 1636-52, September.
    3. Jose Apesteguia & Miguel A. Ballester, 2011. "Welfare of naive and sophisticated players in school choice," Economics Working Papers 1280, Department of Economics and Business, Universitat Pompeu Fabra.
    4. Atila Abdulkadiroglu & Yeon-Koo Che & Yosuke Yasuda, 2011. "Resolving Conflicting Preferences in School Choice: The "Boston Mechanism" Reconsidered," American Economic Review, American Economic Association, vol. 101(1), pages 399-410, February.
    5. Christopher J. Tyson, 2007. "Cognitive Constraints, Contraction Consistency, and the Satisficing Criterion," Working Papers 614, Queen Mary, University of London, School of Economics and Finance.
    6. Ran Spiegler, 2005. "Competition over Agents with Boundedly Rational Expectations," Levine's Bibliography 122247000000000535, UCLA Department of Economics.
    7. Caplin, Andrew & Dean, Mark, 2011. "Search, choice, and revealed preference," Theoretical Economics, Econometric Society, vol. 6(1), January.
    8. Tyson, Chris, 2001. "The Foundations of Imperfect Decision Making," Research Papers 1714, Stanford University, Graduate School of Business.
    9. Papi, Mauro, 2012. "Satisficing choice procedures," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 451-462.
    10. Elena Reutskaja & Rosemarie Nagel & Colin F. Camerer & Antonio Rangel, 2011. "Search Dynamics in Consumer Choice under Time Pressure: An Eye-Tracking Study," American Economic Review, American Economic Association, vol. 101(2), pages 900-926, April.
    11. Rubinstein, Ariel & Salant, Yuval, 2006. "A model of choice from lists," Theoretical Economics, Econometric Society, vol. 1(1), pages 3-17, March.
    12. Andrew Caplin & Mark Dean & Daniel Martin, 2011. "Search and Satisficing," American Economic Review, American Economic Association, vol. 101(7), pages 2899-2922, December.
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