The Achilles’ heel of Salience theory and a way to fix it

Barna Bakó and Gabor Neszveda

Economics Letters, 2020, vol. 193, issue C

Abstract: Salience theory has been successfully used to explain a wide range of empirical and experimental phenomena such as the Allais paradox, framing effect, the preference reversal phenomenon or the decoy and compromise effects. In this paper we show that salience theory carries a notable flaw and under certain circumstances it suggests that a salient thinker may prefer a dominated option even when a strictly dominant alternative is available to her. To solve this problem we propose a possible alteration of the theory and show how it accounts for the same phenomena as the salience theory.

Keywords: Salience theory; Context dependent choice; Allais paradox; Preference reversal; Decoy and compromise effects (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:193:y:2020:i:c:s0165176520301804

DOI: 10.1016/j.econlet.2020.109265

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