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Satisficing and maximizing consumers in a monopolistic screening model

  • Papi, Mauro
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    We study a simple model in which a monopolist supplies a multi-attribute good and does not know whether the consumer is an expected-utility maximizer or a boundedly rational type that follows the satisficing heuristic proposed by Herbert Simon. We find that, unless the probability of the consumer being fully rational is sufficiently high, the fact that a boundedly rational consumer never exchanges satisfactory with unsatisfactory alternatives implies that he/she never ends up with an alternative strictly better than his/her aspiration levels.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165489613000760
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    Article provided by Elsevier in its journal Mathematical Social Sciences.

    Volume (Year): 66 (2013)
    Issue (Month): 3 ()
    Pages: 385-389

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    Handle: RePEc:eee:matsoc:v:66:y:2013:i:3:p:385-389
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505565

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    1. Tyson, Chris, 2001. "The Foundations of Imperfect Decision Making," Research Papers 1714, Stanford University, Graduate School of Business.
    2. Atila Abdulkadiroglu & Yeon-Koo Che & Yosuke Yasuda, 2011. "Resolving Conflicting Preferences in School Choice: The "Boston Mechanism" Reconsidered," American Economic Review, American Economic Association, vol. 101(1), pages 399-410, February.
    3. Spiegler, Ran, 2006. "Competition over agents with boundedly rational expectations," Theoretical Economics, Econometric Society, vol. 1(2), pages 207-231, June.
    4. Rubinstein, Ariel & Salant, Yuval, 2006. "A model of choice from lists," Theoretical Economics, Econometric Society, vol. 1(1), pages 3-17, March.
    5. Christopher J. Tyson, 2007. "Cognitive Constraints, Contraction Consistency, and the Satisficing Criterion," Working Papers 614, Queen Mary University of London, School of Economics and Finance.
    6. Apesteguia, Jose & Ballester, Miguel A., 2012. "Welfare of naive and sophisticated players in school choice," Economics Letters, Elsevier, vol. 115(2), pages 172-174.
    7. Papi, Mauro, 2012. "Satisficing choice procedures," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 451-462.
    8. Andrew Caplin & Mark Dean & Daniel Martin, 2011. "Search and Satisficing," American Economic Review, American Economic Association, vol. 101(7), pages 2899-2922, December.
    9. Spiegler, Ran, 2014. "Bounded Rationality and Industrial Organization," OUP Catalogue, Oxford University Press, number 9780199334261, March.
    10. Caplin, Andrew & Dean, Mark, 2011. "Search, choice, and revealed preference," Theoretical Economics, Econometric Society, vol. 6(1), January.
    11. Elena Reutskaja & Rosemarie Nagel & Colin F. Camerer & Antonio Rangel, 2011. "Search Dynamics in Consumer Choice under Time Pressure: An Eye-Tracking Study," American Economic Review, American Economic Association, vol. 101(2), pages 900-926, April.
    12. Parag A. Pathak & Tayfun Sonmez, 2008. "Leveling the Playing Field: Sincere and Sophisticated Players in the Boston Mechanism," American Economic Review, American Economic Association, vol. 98(4), pages 1636-52, September.
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