A Simple Choice Model for Boundedly Rational Agents

Abstract

We analyze a restricted pro-con random choice model of Dogan and Yildiz (2018) in which there are only two observable orderings relevant for choice such as price and quality. An agent is endowed with two orderings that both serve as pro-orderings and con-orderings. For each choice set, if an alternative is the top-ranked (bottom-ranked) by one of these orderings, then this is a pro (con) for choosing that alternative. Each pro or con item has a weight reflecting its salience. Each alternative is chosen with a probability proportional to the total weight of its pros and cons. In our analysis, we provide a set of choice axioms, which guarantee that the observed choices can be generated via a pro-con random choice model with respect to two given observable orderings. A notable aspect of this characterization is that the associated axioms discipline the choice behavior when choice sets present attraction effect scenarios. This indicates the tight connection between the model and the attraction effect phenomena.

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