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A Salience Theory of Choice Errors

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  • Paola Manzini
  • Marco Mariotti

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 speci?c 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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Paper provided by Department of Economics, University of St. Andrews in its series Discussion Paper Series, Department of Economics with number 201003.

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Date of creation: 15 Jun 2010
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Handle: RePEc:san:wpecon:1003

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Keywords: Discrete choice; Random utility; Logit model; Consideration sets; bounded rationality;

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  1. 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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