Choice by sequential procedures

doi:10.1016/j.geb.2012.09.006

Games and Economic Behavior

Volume 77, Issue 1, January 2013, Pages 90-99

https://doi.org/10.1016/j.geb.2012.09.006 Get rights and content

Abstract

We propose a rule of decision-making, the sequential procedure guided by routes, and show that three influential boundedly rational choice models can be equivalently understood as special cases of this rule. In addition, the sequential procedure guided by routes is instrumental in showing that the three models are intimately related. We show that choice with a status quo bias is a refinement of rationalizability by game trees, which, in turn, is also a refinement of sequential rationalizability. Thus, we provide a sharp taxonomy of these choice models, and show that they all can be understood as choice by sequential procedures.

Highlights

► We provide a clean and sharp taxonomy of three recent and influential models of nonstandard choice behavior. ► The status quo bias theory of Masatlioglu and Ok, 2005, Masatlioglu and Ok, 2010. ► The notion of rationalizability by game trees due to Xu and Zhou (2007). ► Manzini and Mariottiʼs (2007) sequential rationalizability model. ► We think our results are crucial for a good understanding of the literature, and for its proper development in the future.

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In the theory of rationalization of Cherepanov et al. (2013), the DM preliminarily discards items not satisfying some psychological constraint. Apesteguia and Ballester (2013) describe a choice guided by routes. Yildiz (2016) discusses a choice rule based on a pairwise comparison of items according to an ordered list.
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^☆: This paper supercedes our paper “A characterization of sequential rationalizability,” 2008. We thank Raphael Giraud, Sean Horan, Barton Lipman, Paola Manzini, Marco Mariotti, Prasanta Pattanaik, Mauro Papi, Ariel Rubinstein, Michael Richter, Karl Schlag, Rani Spiegler, Yongsheng Xu, Lin Zhou, and an anonymous referee for their valuable comments. Financial support by the Spanish Commission of Science (ECO2008-04756-Grupo Consolidado, ECO2009-12836, ECO2010-09555-E, and ECO2011-25295) is gratefully acknowledged.

¹: Fax: +34 93 581 2012.

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Choice by sequential procedures☆

Abstract

Highlights

J. Math. Econ.

J. Econ. Theory

J. Econ. Theory

J. Econ. Theory

J. Econ. Behav. Organ.

J. Econ. Theory

A theory of reference-dependent behavior

Econ. Theory

How demanding is the revealed preference approach to demand?

Amer. Econ. Rev.

Non-deteriorating choice

Economica

Maximal-element rationalizability

Theory Dec.

Reason-based choice: a bargaining rationale for the attraction and compromise effects

Theoretical Econ.

The money pump as a measure of revealed preference violations

J. Polit. Economy