Dynamic Logit With Choice Aversion

Drew Fudenberg and Tomasz Strzalecki

Econometrica, 2015, vol. 83, 651-691

Abstract: We characterize a generalization of discounted logistic choice that incorporates a parameter to capture different views the agent might have about the costs and benefits of larger choice sets. The discounted logit model used in the empirical literature is the special case that displays a “preference for flexibility” in the sense that the agent always prefers to add additional items to a menu. Other cases display varying levels of “choice aversion,” where the agent prefers to remove items from a menu if their ex ante value is below a threshold. We show that higher choice aversion, as measured by dislike of bigger menus, also corresponds to an increased preference for putting off decisions as late as possible.

Date: 2015
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Working Paper: Dynamic Logit with Choice Aversion (2015)
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