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A Salience Theory of Choice Errors

Author

Listed:
  • Manzini, Paola

    (University of Bristol)

  • Mariotti, Marco

    (Queen Mary, University of London)

Abstract

We 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 affect 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.

Suggested Citation

  • Manzini, Paola & Mariotti, Marco, 2010. "A Salience Theory of Choice Errors," IZA Discussion Papers 5006, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5006
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    References listed on IDEAS

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    1. Ariel Rubinstein & Yuval Salant, 2012. "Eliciting Welfare Preferences from Behavioural Data Sets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(1), pages 375-387.
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    3. Kfir Eliaz & Ran Spiegler, 2011. "Consideration Sets and Competitive Marketing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 235-262.
    4. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer;Economic Science Association, vol. 1(1), pages 9-41, June.
    5. Daniel McFadden, 2001. "Economic Choices," American Economic Review, American Economic Association, vol. 91(3), pages 351-378, June.
    6. McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
    7. Paola Manzini & Marco Mariotti, 2007. "Sequentially Rationalizable Choice," American Economic Review, American Economic Association, vol. 97(5), pages 1824-1839, December.
    8. Hauser, John R & Wernerfelt, Birger, 1990. "An Evaluation Cost Model of Consideration Sets," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 16(4), pages 393-408, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    discrete choice; random utility; logit model; consideration sets; bounded rationality;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General

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