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Order-k Rationality

Author

Listed:
  • Salvador Barber‡
  • Geoffroy de Clippel
  • Alejandro Neme
  • Kareen Rozen

Abstract

A decision maker (DM) may not perfectly maximize her preference over the feasible set. She may feel it is good enough to maximize her preference over a sufficiently large consideration set; or just require that her choice is sufficiently well-ranked (e.g., in the top quintile of options); or even endogenously determine a threshold for what is good enough, based on an initial sampling of the options. Heuristics such as these are all encompassed by a common theory of Order-k Rationality, which relaxes perfect optimization by only requiring choices from a set S to fall within the set's top k(S) elements according to the DM's preference ordering. Heuristics aside, this departure from rationality offers a natural way, in the classic 'as if' tradition, to gradually accommodate more choice patterns as k increases. We characterize the empirical content of Order-k Rationality (and related theories), and provide a tractable testing method which is comparable to the method of checking SARP.

Suggested Citation

  • Salvador Barber‡ & Geoffroy de Clippel & Alejandro Neme & Kareen Rozen, 2020. "Order-k Rationality," Working Papers 2020-10, Brown University, Department of Economics.
    • Handle: RePEc:bro:econwp:2020-10
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    File URL: https://economics.brown.edu/sites/g/files/dprerj726/files/papers/Bravo%20Working%20Paper%202020-010.pdf
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    Other versions of this item:

    • Salvador Barberà & Geoffroy de Clippel & Alejandro Neme & Kareen Rozen, 2022. "Order-k rationality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(4), pages 1135-1153, June.
    • Salvador Barberà & Geoffroy De Cleppel & Alejandro Neme & Kareen Rozeen, 2020. "Order-k Rationality," Working Papers 4, Red Nacional de Investigadores en Economía (RedNIE).
    • Kareen Rozen & Alejandro Neme & Geoffroy De Clippel & Salvador BarberÃ, 2019. "Order-k Rationality," Working Papers 1130, Barcelona School of Economics.

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    Cited by:

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    2. Bhardwaj, Bhavook & Manocha, Kriti, 2025. "A model of rejection-based decision making," Journal of Economic Theory, Elsevier, vol. 228(C).

    More about this item

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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