IDEAS home Printed from https://ideas.repec.org/a/eee/jetheo/v175y2018icp159-177.html
   My bibliography  Save this article

Context-dependent choice as explained by foraging theory

Author

Listed:
  • Li, Shengwu
  • Yu, Ning Neil

Abstract

An agent makes consumption choices in multiple periods. Choice objects vary in type and quality; objects of the same type are inter-temporal substitutes. The current choice set is informative about the distribution over future choice sets. Thus, the presence of unchosen alternatives may rationally alter the agent's choice. Under some simple assumptions, the optimal policy exhibits context-dependent choice behavior, such as the decoy effect and choice overload.

Suggested Citation

  • Li, Shengwu & Yu, Ning Neil, 2018. "Context-dependent choice as explained by foraging theory," Journal of Economic Theory, Elsevier, vol. 175(C), pages 159-177.
    • Handle: RePEc:eee:jetheo:v:175:y:2018:i:c:p:159-177
    DOI: 10.1016/j.jet.2018.01.014
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S002205311830022X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jet.2018.01.014?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Benjamin Scheibehenne & Rainer Greifeneder & Peter M. Todd, 2010. "Can There Ever Be Too Many Options? A Meta-Analytic Review of Choice Overload," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 37(3), pages 409-425, October.
    2. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, October.
    3. Pettibone, Jonathan C. & Wedell, Douglas H., 2000. "Examining Models of Nondominated Decoy Effects across Judgment and Choice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 81(2), pages 300-328, March.
    4. Simone Galperti & Bruno Strulovici, 2017. "A Theory of Intergenerational Altruism," Econometrica, Econometric Society, vol. 85, pages 1175-1218, July.
    5. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
    6. R. H. Strotz, 1955. "Myopia and Inconsistency in Dynamic Utility Maximization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 23(3), pages 165-180.
    7. Drew Fudenberg & Tomasz Strzalecki, 2015. "Dynamic Logit With Choice Aversion," Econometrica, Econometric Society, vol. 83, pages 651-691, March.
    8. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-180, January.
    9. Yoram Halevy, 2015. "Time Consistency: Stationarity and Time Invariance," Econometrica, Econometric Society, vol. 83, pages 335-352, January.
    10. McFadden, Daniel, 1999. "Rationality for Economists?," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 73-105, December.
    11. ,, 2011. "Dynamic choice under ambiguity," Theoretical Economics, Econometric Society, vol. 6(3), September.
    12. Wernerfelt, Birger, 1995. "A Rational Reconstruction of the Compromise Effect: Using Market Data to Infer Utilities," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 21(4), pages 627-633, March.
    13. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    14. Prelec, Drazen & Wernerfelt, Birger & Zettelmeyer, Florian, 1997. "The Role of Inference in Context Effects: Inferring What You Want from What Is Available," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 24(1), pages 118-125, June.
    15. Herne, Kaisa, 1997. "Decoy alternatives in policy choices: Asymmetric domination and compromise effects," European Journal of Political Economy, Elsevier, vol. 13(3), pages 575-589, September.
    16. Emir Kamenica, 2008. "Contextual Inference in Markets: On the Informational Content of Product Lines," American Economic Review, American Economic Association, vol. 98(5), pages 2127-2149, December.
    17. Huber, Joel & Puto, Christopher, 1983. "Market Boundaries and Product Choice: Illustrating Attraction and Substitution Effects," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 10(1), pages 31-44, June.
    18. Epstein, Larry G., 1983. "Stationary cardinal utility and optimal growth under uncertainty," Journal of Economic Theory, Elsevier, vol. 31(1), pages 133-152, October.
    19. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    20. Ian J. Bateman & Alistair Munro & Gregory L. Poe, 2008. "Decoy Effects in Choice Experiments and Contingent Valuation: Asymmetric Dominance," Land Economics, University of Wisconsin Press, vol. 84(1), pages 115-127.
    21. Botond Koszegi & Adam Szeidl, 2013. "A Model of Focusing in Economic Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(1), pages 53-104.
    22. Ariely, Dan & Wallsten, Thomas S., 1995. "Seeking Subjective Dominance in Multidimensional Space: An Explanation of the Asymmetric Dominance Effect," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(3), pages 223-232, September.
    23. Amos Tversky & Itamar Simonson, 1993. "Context-Dependent Preferences," Management Science, INFORMS, vol. 39(10), pages 1179-1189, October.
    24. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Goff, Sandra H., 2021. "A test of willingness to pay as penance in the demand for ethical consumption," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 94(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ronayne, David & Brown, Gordon D.A., 2016. "Multi-attribute decision by sampling: An account of the attraction, comprimise and similarity effects," The Warwick Economics Research Paper Series (TWERPS) 1124, University of Warwick, Department of Economics.
    2. Nasim Mousavi & Panagiotis Adamopoulos & Jesse Bockstedt, 2023. "The Decoy Effect and Recommendation Systems," Information Systems Research, INFORMS, vol. 34(4), pages 1533-1553, December.
    3. Castillo, Geoffrey, 2020. "The attraction effect and its explanations," Games and Economic Behavior, Elsevier, vol. 119(C), pages 123-147.
    4. Fabio Galeotti & Maria Montero & Anders Poulsen, 2022. "The Attraction and Compromise Effects in Bargaining: Experimental Evidence," Management Science, INFORMS, vol. 68(4), pages 2987-3007, April.
    5. Jörg Rieskamp & Jerome R. Busemeyer & Barbara A. Mellers, 2006. "Extending the Bounds of Rationality: Evidence and Theories of Preferential Choice," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 631-661, September.
    6. Dahremöller, Carsten & Fels, Markus, 2015. "Product lines, product design, and limited attention," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 437-456.
    7. Liang Guo, 2016. "Contextual Deliberation and Preference Construction," Management Science, INFORMS, vol. 62(10), pages 2977-2993, October.
    8. Marcel Lichters & Marko Sarstedt & Bodo Vogt, 2015. "On the practical relevance of the attraction effect: A cautionary note and guidelines for context effect experiments," AMS Review, Springer;Academy of Marketing Science, vol. 5(1), pages 1-19, June.
    9. Marcel Lichters & Marko Sarstedt & Bodo Vogt, 2015. "On the practical relevance of the attraction effect: A cautionary note and guidelines for context effect experiments," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 5(1), pages 1-19, June.
    10. Tserenjigmid, Gerelt, 2019. "Choosing with the worst in mind: A reference-dependent model," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 631-652.
    11. Fabrice Le Lec & Marianne Lumeau & Benoît Tarroux, 2016. "Choice or information overload ?," Economics Working Paper Archive (University of Rennes & University of Caen) 2016-07, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    12. Pinger, Pia & Ruhmer-Krell, Isabel & Schumacher, Heiner, 2016. "The compromise effect in action: Lessons from a restaurant's menu," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 14-34.
    13. Nosratabadi, Hassan, 2022. "Reference-dependent choice under plurality rule," Mathematical Social Sciences, Elsevier, vol. 115(C), pages 88-98.
    14. Ekström, Mathias, 2021. "The (un)compromise effect: How suggested alternatives can promote active choice," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    15. Liang Guo, 2022. "Testing the Role of Contextual Deliberation in the Compromise Effect," Management Science, INFORMS, vol. 68(6), pages 4326-4355, June.
    16. Cunningham, Thomas, 2013. "Biases and Implicit Knowledge," MPRA Paper 50292, University Library of Munich, Germany.
    17. Scholten, Marc, 2002. "Conflict-mediated choice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 88(2), pages 683-718, July.
    18. Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2016. "A life-cycle model with ambiguous survival beliefs," Journal of Economic Theory, Elsevier, vol. 162(C), pages 137-180.
    19. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Consumer Choice," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 803-843.
    20. Strulik, Holger & Werner, Katharina, 2023. "Renewable resource use with imperfect self-control," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 778-795.

    More about this item

    Keywords

    Decoy effect; Choice overload; Foraging theory; Consumer choice; Dynamic stochastic choice model; Monotone comparative statics;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:175:y:2018:i:c:p:159-177. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622869 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.