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Dynamic Logit with Choice Aversion

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  • Fudenberg, Drew
  • Strzalecki, Tomasz

Abstract

We characterize a generalization of discounted logistic choice that incorporates a parameter to capture different views the agent might have about the costs and benefits of larger choice sets. The discounted logit model used in the empirical literature is the special case that displays a “preference for flexibility†in the sense that the agent always prefers to add additional items to a menu. Other cases display varying levels of “choice aversion,†where the agent prefers to remove items from a menu if their ex ante value is below a threshold. We show that higher choice aversion, as measured by dislike of bigger menus, also corresponds to an increased preference for putting off decisions as late as possible.

Suggested Citation

  • Fudenberg, Drew & Strzalecki, Tomasz, 2015. "Dynamic Logit with Choice Aversion," Scholarly Articles 14397609, Harvard University Department of Economics.
  • Handle: RePEc:hrv:faseco:14397609
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    Cited by:

    1. Jakub Steiner & Colin Stewart & Filip Matějka, 2017. "Rational Inattention Dynamics: Inertia and Delay in Decision‐Making," Econometrica, Econometric Society, vol. 85, pages 521-553, March.
    2. repec:eee:jetheo:v:180:y:2019:i:c:p:383-437 is not listed on IDEAS
    3. T. Tony Ke & Zuo-Jun Max Shen & J. Miguel Villas-Boas, 2016. "Search for Information on Multiple Products," Management Science, INFORMS, vol. 62(12), pages 3576-3603, December.
    4. Breitmoser, Yves, 2016. "The axiomatic foundation of logit and its relation to behavioral welfare," MPRA Paper 71632, University Library of Munich, Germany.
    5. S. Cerreia-Vioglio & F. Maccheroni & M. Marinacci & A. Rustichini, 2017. "Multinomial logit processes and preference discovery: inside and outside the black box," Working Papers 615, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    6. repec:eee:jetheo:v:175:y:2018:i:c:p:159-177 is not listed on IDEAS
    7. repec:spr:etbull:v:5:y:2017:i:2:d:10.1007_s40505-016-0110-3 is not listed on IDEAS
    8. Breitmoser, Yves, 2018. "The Axiomatic Foundation of Logit," Rationality and Competition Discussion Paper Series 78, CRC TRR 190 Rationality and Competition.
    9. D. Pennesi, 2016. "Intertemporal discrete choice," Working Papers wp1061, Dipartimento Scienze Economiche, Universita' di Bologna.

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