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Choice by iterative search

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Author Info

  • Nakajima, Daisuke

    ()
    (Department of Economics, Otaru University of Commerce)

  • Masatlioglu, Yusufcan

    ()
    (Department of Economics, University of Michigan)

Abstract

When making choices, decision makers often either lack information about alternatives or lack the cognitive capacity to analyze every alternative. To capture these situations, we formulate a framework to study behavioral search by utilizing the idea of consideration sets. Consumers engage in a dynamic search process. At each stage, they consider only those options in the current consideration set. We provide behavioral postulates characterizing this model. We illustrate how one can identify both search paths and preferences.

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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 8 (2013)
Issue (Month): 3 (September)
Pages:

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Handle: RePEc:the:publsh:1014

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Web page: http://econtheory.org

Related research

Keywords: Search; satisficing; bounded rationality; consideration set; reference-dependent choice; revealed preference;

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References

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  1. Douglas Bernheim & Antonio Rangel, 2007. "Beyond Revealed Preference Choice Theoretic Foundations for Behavioral Welfare Economics," Discussion Papers 07-031, Stanford Institute for Economic Policy Research.
  2. Paola Manzini & Marco Mariotti, 2006. "Consumer Choice and Revealed Bounded Rationality," Working Papers 571, Queen Mary, University of London, School of Economics and Finance.
  3. Hey, John D., 1982. "Search for rules for search," Journal of Economic Behavior & Organization, Elsevier, vol. 3(1), pages 65-81, March.
  4. Przemyslaw Jeziorski & Ilya Segal, 2010. "What Makes them Click: Empirical Analysis of Consumer Demand for Search Advertising," Economics Working Paper Archive 569, The Johns Hopkins University,Department of Economics.
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  6. Eliaz, Kfir & Spiegler, Ran, 2010. "On the Strategic Use of Attention Grabbers," CEPR Discussion Papers 7863, C.E.P.R. Discussion Papers.
  7. Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1133-1165, November.
  8. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Y. Ozbay, 2012. "Revealed Attention," American Economic Review, American Economic Association, vol. 102(5), pages 2183-2205, August.
  9. Eliaz, Kfir & Spiegler, Ran, 2006. "Consideration Sets and Competitive Marketing," MPRA Paper 21434, University Library of Munich, Germany, revised 03 Sep 2009.
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  19. Hauser, John R & Wernerfelt, Birger, 1990. " An Evaluation Cost Model of Consideration Sets," Journal of Consumer Research, University of Chicago Press, vol. 16(4), pages 393-408, March.
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  22. Masatlioglu, Yusufcan & Ok, Efe A., 2005. "Rational choice with status quo bias," Journal of Economic Theory, Elsevier, vol. 121(1), pages 1-29, March.
  23. Kenneth Hendricks & Alan Sorensen & Thomas Wiseman, 2012. "Observational Learning and Demand for Search Goods," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 1-31, February.
  24. Sen, Amartya, 1993. "Internal Consistency of Choice," Econometrica, Econometric Society, vol. 61(3), pages 495-521, May.
  25. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
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  28. B. Douglas Bernheim & Antonio Rangel, 2009. "Beyond Revealed Preference: Choice-Theoretic Foundations for Behavioral Welfare Economics-super-," The Quarterly Journal of Economics, MIT Press, vol. 124(1), pages 51-104, February.
  29. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
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Citations

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Cited by:
  1. Fernando Alvarez & Francesco Lippi & Luigi Paciello, 2010. "Optimal Price Setting with Observation and Menu Costs," EIEF Working Papers Series 1010, Einaudi Institute for Economics and Finance (EIEF), revised May 2010.
  2. Andrew Caplin & Mark Dean & Daniel Martin, 2011. "Search and Satisficing," American Economic Review, American Economic Association, vol. 101(7), pages 2899-2922, December.
  3. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Ozbay, 2009. "Revealed Attention," NajEcon Working Paper Reviews 814577000000000409, www.najecon.org.
  4. Dimitrov, Dinko & Mukherjee, Saptarshi & Muto, Nozomu, 2013. "List-based decision problems," Discussion Papers 2013-02, Graduate School of Economics, Hitotsubashi University.
  5. Eliaz, Kfir & Spiegler, Ran, 2010. "On the Strategic Use of Attention Grabbers," CEPR Discussion Papers 7863, C.E.P.R. Discussion Papers.
  6. Andrew Caplin & Daniel Martin, 2011. "A Testable Theory of Imperfect Perception," NBER Working Papers 17163, National Bureau of Economic Research, Inc.
  7. Papi, Mauro, 2012. "Satisficing choice procedures," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 451-462.
  8. Toru Suzuki, 2012. "Persuasive Silence," Jena Economic Research Papers 2012-014, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  9. Manzini, Paola & Mariotti, Marco & Tyson, Christopher J., 2011. "Manipulation of Choice Behavior," IZA Discussion Papers 5891, Institute for the Study of Labor (IZA).

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