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Positively correlated choice

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  • Barokas, Guy

Abstract

We provide an axiomatic foundation for a choice model with two periods between which preferences are updated, but the second period choices are positively correlated with past choices in a manner that is unrelated to the agent’s preferences. Specifically, in our model, the agent chooses alternative x over alternative y in contrast to his past choice if and only if the difference between the utility of x and that of y is higher than some fixed cost. While restrictive in its nature, this representation captures several related but distinctive phenomena: a taste for consistency, cognitive dissonance, the escalation of commitment, passive choice, and habit formation. We also provide a representation that allows for a more general form of cost and the revealed preference implications of our models. Finally, we connect our representation to the theories of imperfect discrimination.

Suggested Citation

  • Barokas, Guy, 2024. "Positively correlated choice," Mathematical Social Sciences, Elsevier, vol. 127(C), pages 62-71.
    • Handle: RePEc:eee:matsoc:v:127:y:2024:i:c:p:62-71
    DOI: 10.1016/j.mathsocsci.2023.08.001
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