Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/36879 
Year of Publication: 
2010
Series/Report no.: 
IZA Discussion Papers No. 5006
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
We study a psychologically based foundation for choice errors. The decision maker applies a preference ranking after forming a 'consideration set' prior to choosing an alternative. Membership of the consideration set is determined both by the alternative specific salience and by the rationality of the agent (his general propensity to consider all alternatives). The model turns out to include a logit formulation as a special case. In general, it has a rich set of implications both for exogenous parameters and for a situation in which alternatives can affect their own salience (salience games). Such implications are relevant to assess the link between 'revealed' preferences and 'true' preferences: for example, less rational agents may paradoxically express their preference through choice more truthfully than more rational agents.
Subjects: 
Discrete choice
random utility
logit model
consideration sets
bounded rationality
JEL: 
D0
Document Type: 
Working Paper

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