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Dynamic Logit with Choice Aversion

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  • Drew Fudenberg
  • Tomasz Strzalecki

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.
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  • Drew Fudenberg & Tomasz Strzalecki, "undated". "Dynamic Logit with Choice Aversion," Working Paper 40033, Harvard University OpenScholar.
  • Handle: RePEc:qsh:wpaper:40033
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    File URL: http://scholar.harvard.edu/tomasz/node/40033
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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:spr:etbull:v:5:y:2017:i:2:d:10.1007_s40505-016-0110-3 is not listed on IDEAS
    3. Breitmoser, Yves, 2016. "The axiomatic foundation of logit and its relation to behavioral welfare," MPRA Paper 71632, University Library of Munich, Germany.
    4. Breitmoser, Yves, 2018. "The Axiomatic Foundation of Logit," Rationality and Competition Discussion Paper Series 78, CRC TRR 190 Rationality and Competition.
    5. D. Pennesi, 2016. "Intertemporal discrete choice," Working Papers wp1061, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. 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.

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