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Pairwise normalization: A neuroeconomic theory of multi-attribute choice

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  • Landry, Peter
  • Webb, Ryan

Abstract

We present a theory of multi-attribute choice founded in the neuroscience of perception. Valuation is formed through a series of pairwise, attribute-level comparisons implemented by (divisive) normalization — a form of relative value coding observed across sensory modalities and in species ranging from honeybees to humans. Such “pairwise normalization” captures a broad range of behavioral regularities in multi-attribute choice, including the compromise and asymmetric dominance effects, the diversification bias in allocation decisions, and majority-rule preference cycles.

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  • Landry, Peter & Webb, Ryan, 2021. "Pairwise normalization: A neuroeconomic theory of multi-attribute choice," Journal of Economic Theory, Elsevier, vol. 193(C).
    • Handle: RePEc:eee:jetheo:v:193:y:2021:i:c:s0022053121000387
    DOI: 10.1016/j.jet.2021.105221
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    2. Herweg, Fabian & Weinschenk, Philipp, 2022. "Multi-attribute heuristics and intertemporal choices," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 174-181.
    3. Jason Somerville, 2022. "Range‐Dependent Attribute Weighting in Consumer Choice: An Experimental Test," Econometrica, Econometric Society, vol. 90(2), pages 799-830, March.
    4. Brocas, Isabelle & Carrillo, Juan D., 2021. "Value computation and modulation: A neuroeconomic theory of self-control as constrained optimization," Journal of Economic Theory, Elsevier, vol. 198(C).
    5. Cassidy Shubatt & Jeffrey Yang, 2024. "Tradeoffs and Comparison Complexity," Papers 2401.17578, arXiv.org, revised Oct 2024.
    6. Herweg, Fabian & Müller, Daniel, 2021. "A comparison of regret theory and salience theory for decisions under risk," Journal of Economic Theory, Elsevier, vol. 193(C).
    7. Elias Bouacida, 2021. "Identifying Choice Correspondences," Working Papers 327800275, Lancaster University Management School, Economics Department.
    8. Changkuk Im, 2023. "Accurate Quality Elicitation in a Multi-Attribute Choice Setting," Papers 2309.00114, arXiv.org, revised Dec 2023.

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    More about this item

    Keywords

    Neuroeconomics; Consumer theory; Multi-attribute choice; Decoy effects;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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