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Rationalizing Boundedly Rational Choice: Sequential Rationalizability and Rational Shortlist Methods

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Author Info

  • Manzini, Paola

    () (University of St. Andrews)

  • Mariotti, Marco

    () (University of St. Andrews)

Abstract

A sequentially rationalizable choice function is a choice function which can be obtained by applying sequentially a fixed set of asymmetric binary relations (rationales). A Rational ShortlistMethod (RSM) is a choice function which is sequentially rationalizable by two rationales. These concepts translate into economic language some human choice heuristics studied in psychology. We provide a full characterization of RSMs and study some properties of sequential rationalizability. These properties allow some degree of menu dependence in choice.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1239.

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Length: 28 pages
Date of creation: Aug 2004
Date of revision:
Publication status: published as "Sequentially Rationalizable Choice" in: American Economic Review, 2007, 97 (5), 1824-1839
Handle: RePEc:iza:izadps:dp1239

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Related research

Keywords: incomplete preferences; intransitive choice; bounded rationality; menu dependence; rationalizability of choice;

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References

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  1. Amartya Sen, 1996. "Maximization and the Act of Choice," Harvard Institute of Economic Research Working Papers 1766, Harvard - Institute of Economic Research.
  2. Mandler, Michael, 2005. "Incomplete preferences and rational intransitivity of choice," Games and Economic Behavior, Elsevier, vol. 50(2), pages 255-277, February.
  3. Wulf Gaertner & Yongsheng Xu, 1999. "On rationalizability of choice functions: A characterization of the median," Social Choice and Welfare, Springer, vol. 16(4), pages 629-638.
  4. Paola Manzini & Marco Mariotti, 2006. "A Vague Theory of Choice over Time," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 0(1), pages 6.
  5. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  6. Gil Kalai & Ariel Rubinstein & Ran Spiegler, 2001. "Rationalizing Choice Functions by Multiple Rationales," Discussion Paper Series dp278, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  7. Wulf Gaertner & Yongsheng Xu, 1999. "On the structure of choice under different external references," Economic Theory, Springer, vol. 14(3), pages 609-620.
  8. Moulin, Herve, 1994. "Social choice," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 31, pages 1091-1125 Elsevier.
  9. Masatlioglu, Yusufcan & Ok, Efe A., 2005. "Rational choice with status quo bias," Journal of Economic Theory, Elsevier, vol. 121(1), pages 1-29, March.
  10. Nick Baigent & Wulf Gaertner, 1996. "Never choose the uniquely largest A Characterization," Economic Theory, Springer, vol. 8(2), pages 239-249.
  11. Klaus Nehring, 1997. "Rational choice and revealed preference without binariness," Social Choice and Welfare, Springer, vol. 14(3), pages 403-425.
  12. Eliaz, Kfir & Ok, Efe A., 2006. "Indifference or indecisiveness? Choice-theoretic foundations of incomplete preferences," Games and Economic Behavior, Elsevier, vol. 56(1), pages 61-86, July.
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Cited by:
  1. José Alcantud, 2006. "Notes and Comments: Stochastic demand correspondences and their aggregation properties," Decisions in Economics and Finance, Springer, vol. 29(1), pages 55-69, 05.
  2. Ariel Rubinstein & Yuval Salant, 2006. "Two Comments on the Principle of Revealed Preference," Levine's Bibliography 321307000000000272, UCLA Department of Economics.

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