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Stochastic Choice and Consideration Sets

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  • Manzini, Paola

    ()
    (University of St. Andrews)

  • Mariotti, Marco

    ()
    (University of St. Andrews)

Abstract

We model a boundedly rational agent who suffers from limited attention. The agent considers each feasible alternative with a given (unobservable) probability, the attention parameter, and then chooses the alternative that maximises a preference relation within the set of considered alternatives. Both the preference and the attention parameters are identified uniquely by stochastic choice data. The model is the only one for which the impact of removing any alternative a on the choice probability of any other alternative b is non-negative, asymmetric (either a impacts b or vice-versa), menu independent, neutral (the same on any alternative in the menu), and consistent with the impacts on a and b by a common third alternative.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6905.

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Length: 35 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6905

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Keywords: bounded rationality; consideration sets; logit model; random utility; discrete choice; revealed preferences;

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  1. Christopher J. Tyson, 2012. "Behavioral Implications of Shortlisting Procedures," Working Papers, Queen Mary, University of London, School of Economics and Finance 697, Queen Mary, University of London, School of Economics and Finance.
  2. Paola Manzini & Marco Mariotti, 2007. "Sequentially Rationalizable Choice," American Economic Review, American Economic Association, American Economic Association, vol. 97(5), pages 1824-1839, December.
  3. J�rg Rieskamp & Jerome R. Busemeyer & Barbara A. Mellers, 2006. "Extending the Bounds of Rationality: Evidence and Theories of Preferential Choice," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 44(3), pages 631-661, September.
  4. David S. Ahn & Todd Sarver, 2013. "Preference for Flexibility and Random Choice," Econometrica, Econometric Society, Econometric Society, vol. 81(1), pages 341-361, 01.
  5. Alisdair McKay & Filip Matejka, 2011. "Rational Inattention to Discrete Choices: A New Foundation for the Multinomial Logit Model," 2011 Meeting Papers 535, Society for Economic Dynamics.
  6. Mark Voorneveld, 2006. "Probabilistic Choice in Games: Properties of Rosenthal’s t-Solutions," International Journal of Game Theory, Springer, Springer, vol. 34(1), pages 105-121, April.
  7. Eliaz, Kfir & Spiegler, Ran, 2006. "Consideration Sets and Competitive Marketing," MPRA Paper 21434, University Library of Munich, Germany, revised 03 Sep 2009.
  8. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Ozbay, 2009. "Revealed Attention," NajEcon Working Paper Reviews, www.najecon.org 814577000000000409, www.najecon.org.
  9. Daniel McFadden, 2001. "Economic Choices," American Economic Review, American Economic Association, American Economic Association, vol. 91(3), pages 351-378, June.
  10. Michelle Sovinsky Goeree, 2005. "Advertising in the US Personal Computer Industry," Industrial Organization, EconWPA 0503002, EconWPA.
  11. Spiegler, Ran & Eliaz, Kfir, 2011. "On the strategic use of attention grabbers," Theoretical Economics, Econometric Society, Econometric Society, vol. 6(1), January.
  12. Anton Cheremukhin & Anna Popova & Antonella Tutino, 2011. "Experimental evidence on rational inattention," Working Papers, Federal Reserve Bank of Dallas 1112, Federal Reserve Bank of Dallas.
  13. Mattsson, Lars-Goran & Weibull, Jorgen W., 2002. "Probabilistic choice and procedurally bounded rationality," Games and Economic Behavior, Elsevier, Elsevier, vol. 41(1), pages 61-78, October.
  14. Clark, Stephen A., 1995. "Indecisive choice theory," Mathematical Social Sciences, Elsevier, Elsevier, vol. 30(2), pages 155-170, October.
  15. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer, Springer, vol. 1(1), pages 9-41, June.
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