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Similarity-based mistakes in choice

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  • Payró, Fernando
  • Ülkü, Levent

Abstract

We characterize the following choice procedure. The decision maker is endowed with two binary relations over alternatives, a preference and a similarity. In every choice problem she includes in her choice set all alternatives which are similar to the best feasible alternative. Hence she can, by mistake, choose an inferior option because it is similar to the best. We characterize this boundedly rational behavior by suitably weakening the rationalizability axiom of Arrow (1959). We also characterize a variation where the decision maker chooses alternatives on the basis of their similarities to attractive yet infeasible options. We show that similarity-based mistakes of either kind lead to cyclical behavior. Finally, we reinterpret our procedure as a method for choosing a bundle given a set of individual items, in which the decision maker combines the best feasible item with those that complement it.

Suggested Citation

  • Payró, Fernando & Ülkü, Levent, 2015. "Similarity-based mistakes in choice," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 152-156.
    • Handle: RePEc:eee:mateco:v:61:y:2015:i:c:p:152-156
    DOI: 10.1016/j.jmateco.2015.09.002
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    References listed on IDEAS

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    1. Christopher P. Chambers & M. Bumin Yenmez, 2017. "Choice and Matching," American Economic Journal: Microeconomics, American Economic Association, vol. 9(3), pages 126-147, August.
    2. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Y. Ozbay, 2012. "Revealed Attention," American Economic Review, American Economic Association, vol. 102(5), pages 2183-2205, August.
    3. Rubinstein, Ariel, 1988. "Similarity and decision-making under risk (is there a utility theory resolution to the Allais paradox?)," Journal of Economic Theory, Elsevier, vol. 46(1), pages 145-153, October.
    4. Paola Manzini & Marco Mariotti, 2007. "Sequentially Rationalizable Choice," American Economic Review, American Economic Association, vol. 97(5), pages 1824-1839, December.
    5. Gent Bajraj & Levent Ülkü, 2015. "Choosing two finalists and the winner," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 45(4), pages 729-744, December.
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    Cited by:

    1. Kops, Christopher, 2022. "Cluster-shortlisted choice," Journal of Mathematical Economics, Elsevier, vol. 102(C).

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    More about this item

    Keywords

    Bounded rationality; Similarity; Mistakes; Cyclic choice;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General

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