Tradeoffs and Comparison Complexity

Cassidy Shubatt and Jeffrey Yang

Papers from arXiv.org

Abstract: This paper develops a theory of how tradeoffs govern the difficulty of comparisons. In our model, options are easier to compare when they involve less pronounced tradeoffs -- when they are 1) more similar feature-by-feature and 2) closer to dominance. These postulates yield tractable measures of comparison complexity in three domains: multiattribute, lottery, and intertemporal choice. Our model rationalizes multiple behavioral regularities, such as context effects, preference reversals, and apparent probability weighting and hyperbolic discounting. In choice data spanning all three domains, our model predicts errors, inconsistency, and cognitive uncertainty. Manipulating tradeoffs reverses classic behavioral regularities, in line with model predictions.

Date: 2024-01, Revised 2025-08
New Economics Papers: this item is included in nep-cbe, nep-dcm and nep-evo
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