A Salience Theory of Choice Errors

Paola Manzini () and Marco Mariotti ()
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Marco Mariotti: University of St. Andrews

No 5006, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We study a psychologically based foundation for choice errors. The decision maker applies a preference ranking after forming a 'consideration set' prior to choosing an alternative. Membership of the consideration set is determined both by the alternative specific salience and by the rationality of the agent (his general propensity to consider all alternatives). The model turns out to include a logit formulation as a special case. In general, it has a rich set of implications both for exogenous parameters and for a situation in which alternatives can affect their own salience (salience games). Such implications are relevant to assess the link between 'revealed' preferences and 'true' preferences: for example, less rational agents may paradoxically express their preference through choice more truthfully than more rational agents.

Keywords: discrete choice; random utility; logit model; consideration sets; bounded rationality (search for similar items in EconPapers)
JEL-codes: D0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-dcm, nep-evo, nep-mic and nep-upt
Date: 2010-06
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Working Paper: A Salience Theory of Choice Errors (2010)
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