Choice with endogenous categorization

Andrew Ellis and Yusufcan Masatlioglu

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We propose and axiomatize the categorical thinking model (CTM) in which the framing of the decision problem affects how agents categorize alternatives, that in turn affects their evaluation of it. Prominent models of salience, status quo bias, loss-aversion, inequality aversion, and present bias all fit under the umbrella of CTM. This suggests categorization is an underlying mechanism of key departures from the neoclassical model of choice. We specialize CTM to provide a behavioural foundation for the salient thinking model of Bordalo et al. (2013, Journal of Political Economy, 121, 803–843) that highlights its strong predictions and distinctions from other models.

Keywords: choice; categorization; salience (search for similar items in EconPapers)
JEL-codes: D01 D11 D80 D90 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2022-01-01
New Economics Papers: this item is included in nep-evo, nep-his, nep-mic and nep-upt
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Published in Review of Economic Studies, 1, January, 2022, 89(1), pp. 240 - 278. ISSN: 0034-6527

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http://eprints.lse.ac.uk/109787/ Open access version. (application/pdf)

Related works:
Journal Article: Choice with Endogenous Categorization (2022)
Working Paper: Choice with Endogenous Categorization (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:109787

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