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Rationalizing Boundedly Rational Choice

Author

Listed:
  • Paola Manzini

    (Queen Mary, University of London & IZA)

  • Marco Mariotti

    (Queen Mary, University of London)

Abstract

A Rational Shortlist Method (RSM) translates into economic language some sequential choice heuristics studied in psychology. We show that the use of this boundedly rational procedure can be detected from observed choice data through tests that are very similar to those used to detect `rational' choice (such as Samuelson's WARP). Yet, RSMs are compatible with some highly `irrational' patterns of choice observed in experiments, such as pairwise cycles. We also provide partial results on a generalization of RSMs.

Suggested Citation

  • Paola Manzini & Marco Mariotti, 2004. "Rationalizing Boundedly Rational Choice," Microeconomics 0407005, University Library of Munich, Germany, revised 21 Dec 2005.
    • Handle: RePEc:wpa:wuwpmi:0407005
    Note: Type of Document - pdf; pages: 26
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/0407/0407005.pdf
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    References listed on IDEAS

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    8. Moulin, Herve, 1994. "Social choice," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.),Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 31, pages 1091-1125, Elsevier.
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    11. Klaus Nehring, 1997. "Rational choice and revealed preference without binariness," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 14(3), pages 403-425.
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    Citations

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    Cited by:

    1. Paola Manzini & Marco Mariotti, 2009. "Consumer choice and revealed bounded rationality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(3), pages 379-392, December.
    2. Paola Manzini & Marco Mariotti, 2006. "Two-stage Boundedly Rational Choice Procedures: Theory and Experimental Evidence," Working Papers 561, Queen Mary University of London, School of Economics and Finance.
    3. SPRUMONT, Yves & EHLERS, Lars, 2005. "Top-Cycle Rationalizability," Cahiers de recherche 2005-20, Universite de Montreal, Departement de sciences economiques.
    4. Houy Nicolas, 2007. "Rationality and Order-Dependent Sequential Rationality," Theory and Decision, Springer, vol. 62(2), pages 119-134, March.
    5. Paola Manzini & Marco Mariotti & Luigi Mittone, 2010. "Choosing monetary sequences: theory and experimental evidence," Theory and Decision, Springer, vol. 69(3), pages 327-354, September.
    6. Tyson, Christopher J., 2008. "Cognitive constraints, contraction consistency, and the satisficing criterion," Journal of Economic Theory, Elsevier, vol. 138(1), pages 51-70, January.
    7. Michele Lombardi, 2008. "Uncovered set choice rules," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 31(2), pages 271-279, August.
    8. B. Douglas Bernheim & Antonio Rangel, 2009. "Beyond Revealed Preference: Choice-Theoretic Foundations for Behavioral Welfare Economics," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 51-104.
    9. Tyson, Christopher J., 2008. "Cognitive constraints, contraction consistency, and the satisficing criterion," Journal of Economic Theory, Elsevier, vol. 138(1), pages 51-70, January.
    10. Paola Manzini & Marco Mariotti, 2005. "Shortlisting," Public Economics 0503006, University Library of Munich, Germany, revised 23 Mar 2006.
    11. Green, Jerry & Hojman, Daniel, 2007. "Choice, Rationality and Welfare Measurement," Working Paper Series rwp07-054, Harvard University, John F. Kennedy School of Government.

    More about this item

    Keywords

    rationalizability of choice; bounded rationality; intransitive choice; incomplete preferences; menu dependence;

    JEL classification:

    • D0 - Microeconomics - - General

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