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Rationalizing Choice with Multi-Self Models

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Abstract

This paper studies a class of multi-self decision-making models proposed in economics, psychology, and marketing. In this class, choices arise from the set-dependent aggregation of a collection of utility functions, where the aggregation procedure satisfies some simple properties. We propose a method for characterizing the extent of irrationality in a choice behavior, and use this measure to provide a lower bound on the set of choice behaviors that can be rationalized with n utility functions. Under an additional assumption (scale-invariance), we show that generically at most five "reasons" are needed for every "mistake."

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File URL: http://cowles.econ.yale.edu/P/cd/d16b/d1670.pdf
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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1670.

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Length: 41 pages
Date of creation: Jul 2008
Date of revision: May 2012
Handle: RePEc:cwl:cwldpp:1670

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Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Keywords: Multi-self models; Index of irrationality; IIA violations; Rationalizability;

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References

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  1. Uzi Segal, 2000. "Let's Agree That All Dictatorships Are Equally Bad," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 569-589, June.
  2. Eddie Dekel, 1997. "A Unique Subjective State Space for Unforeseen Contingencies," Discussion Papers 1202, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Masatlioglu, Yusufcan & Ok, Efe A., 2005. "Rational choice with status quo bias," Journal of Economic Theory, Elsevier, vol. 121(1), pages 1-29, March.
  4. de Clippel, Geoffroy & Eliaz, Kfir, 2012. "Reason-based choice: a bargaining rationale for the attraction and compromise effects," Theoretical Economics, Econometric Society, vol. 7(1), January.
  5. Gerard Debreu, 1959. "Topological Methods in Cardinal Utility Theory," Cowles Foundation Discussion Papers 76, Cowles Foundation for Research in Economics, Yale University.
  6. Evren, Özgür & Ok, Efe A., 2011. "On the multi-utility representation of preference relations," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 554-563.
  7. DHILLON, Amrita & MERTENS, Jean-François, 1993. "Relative Utilitarianism," CORE Discussion Papers 1993048, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Gil Kalai & Ariel Rubenstein & Ran Spiegler, 2001. "Rationalizing Choice Functions by Multiple Rationales," Economics Working Papers 0010, Institute for Advanced Study, School of Social Science.
  9. Benabou, Roland & Pycia, Marek, 2002. "Dynamic inconsistency and self-control: a planner-doer interpretation," Economics Letters, Elsevier, vol. 77(3), pages 419-424, November.
  10. Green, Jerry & Hojman, Daniel, 2007. "Choice, Rationality and Welfare Measurement," Working Paper Series rwp07-054, Harvard University, John F. Kennedy School of Government.
  11. Keeney,Ralph L. & Raiffa,Howard, 1993. "Decisions with Multiple Objectives," Cambridge Books, Cambridge University Press, number 9780521438834, October.
  12. Paola Manzini & Marco Mariotti, 2007. "Sequentially Rationalizable Choice," American Economic Review, American Economic Association, vol. 97(5), pages 1824-1839, December.
  13. Simonson, Itamar, 1989. " Choice Based on Reasons: The Case of Attraction and Compromise Effects," Journal of Consumer Research, University of Chicago Press, vol. 16(2), pages 158-74, September.
  14. John P. Conley & Simon Wilkie & Richard P. McLean, 1996. "Reference functions and possibility theorems for cardinal social choice problems," Social Choice and Welfare, Springer, vol. 14(1), pages 65-78.
  15. W. Pesendorfer & F. Gul, 1999. "Temptation and Self-Control," Princeton Economic Theory Papers 99f1, Economics Department, Princeton University.
  16. B. Douglas Bernheim & Antonio Rangel, 2008. "Beyond Revealed Preference: Choice Theoretic Foundations for Behavioral Welfare Economics," NBER Working Papers 13737, National Bureau of Economic Research, Inc.
  17. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
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Citations

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Cited by:
  1. Kumabe, Masahiro & Mihara, H. Reiju, 2008. "Preference aggregation theory without acyclicity: The core without majority dissatisfaction," MPRA Paper 11728, University Library of Munich, Germany.
  2. Ghosal, Sayantan & Dalton, Patricio, 2013. "Characterizing Behavioral Decisions with Choice Data," CAGE Online Working Paper Series 107, Competitive Advantage in the Global Economy (CAGE).
  3. Apesteguia, Jose & Ballester, Miguel A., 2013. "Choice by sequential procedures," Games and Economic Behavior, Elsevier, vol. 77(1), pages 90-99.
  4. de Clippel, Geoffroy & Eliaz, Kfir, 2012. "Reason-based choice: a bargaining rationale for the attraction and compromise effects," Theoretical Economics, Econometric Society, vol. 7(1), January.
  5. Nakajima, Daisuke & Masatlioglu, Yusufcan, 2013. "Choice by iterative search," Theoretical Economics, Econometric Society, vol. 8(3), September.
  6. Manzini, Paola & Mariotti, Marco & Tyson, Christopher J., 2011. "Manipulation of Choice Behavior," IZA Discussion Papers 5891, Institute for the Study of Labor (IZA).
  7. repec:cge:warwcg:106 is not listed on IDEAS
  8. Eric Danan & Thibault Gajdos & Jean-Marc Tallon, 2013. "Aggregating sets of von Neumann-Morgenstern utilities," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00788647, HAL.
  9. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Y. Ozbay, 2012. "Revealed Attention," American Economic Review, American Economic Association, vol. 102(5), pages 2183-2205, August.
  10. Geoffroy de Clippel, 2012. "Behavioral Implementation," Working Papers 2012-6, Brown University, Department of Economics.

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