Partially dominant choice

Abstract

This paper proposes and analyzes a model of context-dependent choice with stable but incomplete preferences that is based on the idea of partial dominance: An alternative is chosen from a menu if it is not worse than anything in the menu and is also better than something else. This choice procedure provides a simple explanation of the attraction/decoy effect. It reduces to rational choice when preferences are complete in two ways that are made precise. Some preference identification and choice consistency properties associated with this model are analyzed, and certain ways in which its predictions differ from those of other recently proposed models of the attraction effect are also discussed.

Asymmetric dominance, deferral, and status quo bias in a behavioral model of choice

“…When such a comparison can be made, however, the agent chooses among those feasible alternatives that are not dominated by anything in the menu and also dominate something, as captured in (1a). The difference between this part of the EPD model and the model of partially dominant choice proposed in Gerasimou (2015) is that, instead of considering everything to be choosable when faced with a decision problem with a non-specific status quo in which no preference comparison can be made, the agent here always defers choice from such a menu.…”

“…Obviously, the axiom's restrictions do not necessarily apply across decision problems with different status quos. The axiom is named a-WARP because it is a straightforward extension of the axiom under this name that is used in Gerasimou (2015). It obviously relaxes WARP by requiring no weak choice reversals between x and y following choice of one over the other in a binary menu, holding the status quo fixed.…”

“…This axiom is a restatement (under the notation of this paper) of the axiom with the same name that was introduced in Gerasimou (2015). It states that choice of x in a decision problem with a non-specific status quo implies pairwise dominance of x over some y that was rejected in the original problem.…”

“…With regard to recent models of bounded-rational choice that can explain the attraction effect, Lombardi (2009), de Clippel andEliaz (2012), Ok, Ortoleva, and Riella (2015), Bordallo, Gennaioli, and Shleifer (2013) and Gerasimou (2015) are some recent references. These models are all reviewed in the latter paper.…”

“…Behaviour that exhibits choice deferral or status quo bias is sometimes called avoidant behaviour (Anderson, 2003). This paper uses the expanded choice domain introduced in Masatlioglu and Ok (2005) and extends the model of partially dominant choice proposed in Gerasimou (2015) in the direction of allowing for both types of avoidant behavior. This model is the first in the literature to feature a decision maker whose choices are guided by an acyclic and incomplete preference relation that is independent of the decision problem's type and menu of feasible alternatives.…”