(F)Lexicographic Shortlist Method

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Standard rational choice relies on the assumption that a decision maker is certain about her preferences. The psychology literature, on the other hand, provides well-established evidence that consumers are often uncertain about the true value of alternatives. This is particularly so when alternatives have several attributes and focusing on different attributes shifts a decision maker's ranking of alternatives. In this paper, we propose and behaviorally characterize a new model of boundedly rational choice that formalizes these insights from psychology into a choice procedure. Simply put, our approach introduces menu dependence into the idea of lexicographic preferences. We study some of its properties and highlight how this procedure exacerbates any welfare judgments.
Original languageEnglish
Pages (from-to)79-97
Number of pages19
JournalEconomic Theory
Volume65
Issue number1
DOIs
Publication statusPublished - 2018
Externally publishedYes

JEL classifications

  • d01 - Microeconomic Behavior: Underlying Principles
  • d60 - Welfare Economics: General
  • d70 - Analysis of Collective Decision-Making: General

Keywords

  • menu-dependent choice
  • rational shortlist method
  • violations of WARP
  • boundedly rational choice
  • lexicographic preferences

Cite this