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The Decision-Conflict Logit

Georgios Gerasimou

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Abstract: We propose the class of decision-conflict logit models. These are disciplined extensions of the logit with an outside option that assign a menu-dependent utility to that option. The relative value of this utility determines the probability of avoiding/deferring choice and can be interpreted as proxying decision difficulty at each menu. We focus on two subclasses where such difficulty is endogenous and either:(i) caused by resampling, as captured by the quadratic and dual logit models; (ii) decreasing in the utility differences between alternatives. In the latter approach we focus on reciprocal utility differences. This special case is inspired by the influential drift diffusion neuroeconomic model and predicts several observed choice-deferral phenomena. On the applications side, we show how the quadratic logit admits a discrete-choice formulation, and how it can be fruitfully used to study oligopolistic markets with product differentiation when consumers face decision difficulty.

Date: 2020-08, Revised 2021-06
New Economics Papers: this item is included in nep-dcm and nep-upt
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