Choice Aversion in Directed Networks

Jorge Lorca and Emerson Melo

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: This paper studies the problem of optimal path selection in a directed network by decision makers that have an intrinsic distaste for evaluating too many options. We propose a recursive logit model that incorporates choice aversion along the lines introduced by Fudenberg and Strzalecki (2015). We derive optimal flow allocations both sequentially and from a path-choice perspective, which is robust to the presence of overlapping routes. We obtain a tight characterization of welfare in terms of both the network topology and the degree of choice aversion, where we derive comparative statics consistent with previous research.

Date: 2020-05
New Economics Papers: this item is included in nep-net and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:879

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