A Salience Theory of Choice Errors
AbstractWe study a psychologically based foundation for choice errors. The decision maker applies a preference ranking after forming a 'consideration set' prior to choosing an alternative. Membership of the consideration set is determined both by the alternative specific salience and by the rationality of the agent (his general propensity to consider all alternatives). The model turns out to include a logit formulation as a special case. In general, it has a rich set of implications both for exogenous parameters and for a situation in which alternatives can a¤ect their own salience (salience games). Such implications are relevant to assess the link between 'revealed' preferences and 'true' preferences: for example, less rational agents may paradoxically express their preference through choice more truthfully than more rational agents.
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Bibliographic InfoPaper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2010-37.
Date of creation: 2010
Date of revision:
Discrete choice; Random utility; Logit model; Consideration sets; bounded rationality;
Other versions of this item:
- Manzini, Paola & Mariotti, Marco, 2010. "A Salience Theory of Choice Errors," IZA Discussion Papers 5006, Institute for the Study of Labor (IZA).
- Paola Manzini & Marco Mariotti, 2010. "A Salience Theory of Choice Errors," Discussion Paper Series, Department of Economics 201003, Department of Economics, University of St. Andrews.
- D0 - Microeconomics - - General
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- Paola Manzini & Marco Mariotti, 2007. "Sequentially Rationalizable Choice," American Economic Review, American Economic Association, vol. 97(5), pages 1824-1839, December.
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