Rationality with preference discovery costs
Theory and Decision, 2018, vol. 85, issue 2, No 6, 233-251
Abstract Economic theory assumes that preferences are rational. However, experiments have found small violations of transitivity. This paper develops a model of rationality with preference discovery costs. Introspection is costly. Thus, agents may find it optimal to use less than full effort, even though this raises the risk of making a poor choice. This model could potentially explain the intransitivities observed in the data while retaining rationality and optimization.
Keywords: Rationality; Behavioral economics; Experimental economics (search for similar items in EconPapers)
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