The price of flexibility: Towards a theory of Thinking Aversion

Ortoleva, Pietro

doi:10.1016/j.jet.2012.10.009

Cited by 79 publications

(29 citation statements)

References 34 publications

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“…A preference for flexibility distinguishes the information-acquisition problem in a rationally inattentive preference from models where the DM may be "inattentive" to some of the alternatives in a menu (see, e.g., Masatlioglu et al 2012, Manzini and Mariotti 2014, or Ortoleva 2013. 5 Axiom 5 could also be interpreted as expressing a desire for early resolution of uncertainty (Ergin and Sarver 2015).…”

Section: Axiomsmentioning

confidence: 99%

Rationally inattentive preferences and hidden information costs

Oliveira

Denti²,

Mihm

et al. 2017

Theoretical Economics

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We show how information acquisition costs can be identified using observable choice data. Identifying information costs from behavior is especially relevant when these costs depend on factors-such as time, effort, and cognitive resources-that are difficult to observe directly, as in models of rational inattention. Using willingness-to-pay data for opportunity sets-which require more or less information to make choices-we establish a set of canonical properties that are necessary and sufficient to identify information costs. We also provide an axiomatic characterization of the induced rationally inattentive preferences and show how they reveal the amount of information a decision-maker acquires.Keywords. Information costs, Blackwell order, information acquisition, menu choice, rational inattention. JEL classification. D81, D83. This paper merges our independent works, previously circulated as "Axiomatic Foundations for Rational Inattention" (de Oliveira), "Rational Inattention: A Decision-Theoretic Perspective" (Denti), and "Decision Making with Rational Inattention" (Mihm and Ozbek). We are grateful to Larry Blume, Simone CerreiaVioglio, Eddie Dekel, Fabio Maccheroni, Paola Manzini, Massimo Marinacci, Marco Mariotti, Tapan Mitra, Todd Sarver, and Joerg Stoye for invaluable guidance and support. We also thank Nabil Al-Najjar, Andrew Caplin, Aaron Bodoh-Creed, Giulia Brancaccio, Enrico Cantoni, Mark Dean, David Easley, Ludovica Gazzé, Peter Klibanoff, John Leahy, Samreen Malik, Jawwad Noor, Efe Ok, Pietro Ortoleva, Luciano Pomatto, Debraj Ray, Marciano Siniscalchi, Juuso Toikka, Mirko Wiederholt, Muhamet Yildiz, various seminar and conference participants, the editor and three anonymous reviewers for helpful comments and suggestions.

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Section: Axiomsmentioning

confidence: 99%

Rationally inattentive preferences and hidden information costs

Oliveira

Denti²,

Mihm

et al. 2017

Theoretical Economics

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“…This motivation seems related to our comparative statics (Proposition 5) about choice aversion and preference for late decisions. Ortoleva (2013) explicitly considered lotteries and developed a model of "cost of thinking" where the agent ranks lotteries over menus as if she expected to choose the best option from each of them.…”

Section: Relation To the Literaturementioning

confidence: 99%

Dynamic Logit With Choice Aversion

Fudenberg¹,

Strzalecki²

2015

Econometrica

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We characterize a generalization of discounted logistic choice that incorporates a parameter to capture different views the agent might have about the costs and benefits of larger choice sets. The discounted logit model used in the empirical literature is the special case that displays a "preference for flexibility" in the sense that the agent always prefers to add additional items to a menu. Other cases display varying levels of "choice aversion," where the agent prefers to remove items from a menu if their ex ante value is below a threshold. We show that higher choice aversion, as measured by dislike of bigger menus, also corresponds to an increased preference for putting off decisions as late as possible.

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“…In addition to the aforementioned papers, our model relates to Ortoleva's (2013) representation of an agent who dislikes large menus because of the greater "cost of thinking" involved in choosing from them. However, at a methodological level, Ortoleva's primitive is a preference over lotteries of menus, whereas our primitive is the agent's 5 In Chapter 5 of Aleskerov et al (2007), they introduce the concept of a monotone threshold representation, which they refer to as "utility maximization with an isotone threshold."…”

Section: Other Related Literaturementioning

confidence: 99%

Monotone threshold representations

Frick¹

2016

Theoretical Economics

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Motivated by the literature on “choice overload,” we study a boundedly rational agent whose choice behavior admits a monotone threshold representation: There is an underlying rational benchmark, corresponding to maximization of a utility function v, from which the agent's choices depart in a menu‐dependent manner. The severity of the departure is quantified by a threshold map δ, which is monotone with respect to set inclusion. We derive an axiomatic characterization of the model, extending familiar characterizations of rational choice. We classify monotone threshold representations as a special case of Simon's theory of “satisficing,” but as strictly more general than both Tyson's (2008) “expansive satisficing” model as well as Fishburn, 1975 and Luce's (1956) model of choice behavior generated by a semiorder. We axiomatically characterize the difference, providing novel foundations for these models.

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The price of flexibility: Towards a theory of Thinking Aversion

Cited by 79 publications

References 34 publications

Rationally inattentive preferences and hidden information costs

Rationally inattentive preferences and hidden information costs

Dynamic Logit With Choice Aversion

Monotone threshold representations

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