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Rational choice and the relevance of irrelevant alternatives

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Author Info
Seidl, C.
Traub, S. (Tilburg University, Center for Economic Research)

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Abstract

This experimental study investigates the in uence of irrelevant or phantom alternatives on subjects' choices in sequential decision making. Using experimental data from 45 subjects, we found that irrelevant alternatives bear signi cant relevance for decision making. We observe that only 38% of our subjects make the same choice after two phantom alternatives, as compared with the same decision problem when analyzed from scratch. Even allowing for a natural error rate as high as 25%, we nd that between 40% and 60% of our subjects are led astray by the presence of phantom alternatives. Testing then basic postulates of rational choice, we nd moderate violations of contraction monotonicity and static preference consistency, and substantial violations of dynamic preference consistency. Finally we nd that subjects exhibiting rational choice behaviour are far less susceptible to dependence on irrelevant alternatives than subjects which violate rational choice behaviour. Rational choice behaviour is thus a good proxy for the independence of a subject's choices of irrelevant alternatives.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 91.

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Date of creation: 1996
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Handle: RePEc:dgr:kubcen:199691

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Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
D46 - Microeconomics - - Market Structure and Pricing - - - Value Theory
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics

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