A Cognitive Theory of Reasoning and Choice

Pedro Bordalo, Nicola Gennaioli, Giacomo Lanzani and Andrei Shleifer

No 33466, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We present a theory of decisions in which attention to the features of choice options is determined by the decision maker's categorization of the current choice problem in a set of problems she solved in the past. Categorization depends on goal-relevant as well as contextual problem-level features. The model yields systematic heterogeneity in attention and choice in a given problem based on different past experiences, rigidity of choices when categorization does not change despite new data, and discontinuous shifts when changes in bottom-up salient features cause re-categorization. The model unifies major puzzles and framing effects in riskless, statistical, and lottery choice based on heterogenous and unstable mental representations.

JEL-codes: D91 (search for similar items in EconPapers)
Date: 2025-02
New Economics Papers: this item is included in nep-dcm
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