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Anticipated stochastic choice

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  • Nobuo Koida

    (Iwate Prefectural University)

Abstract

The purpose of this study is to characterize stochastic choice influenced by the objective or subjective positions of alternatives in a menu. The main theorem axiomatizes the anticipated stochastic choice (ASC) representation, wherein the decision maker maximizes the expected utility by the cognitive control of a probability measure over mental states that trigger the ex post choice of alternatives. A key prerequisite for this axiomatization is that the randomization between menus is identified with their perfectly correlated mixture, which includes only mixtures of specific alternative pairs. The essential uniqueness of an ASC representation defines an index of rationality that is relevant to a preference for commitment. Special cases of ASC include exact utility maximization, uncontrolled stochastic choice, trembling hands, and choice with limited attention. Furthermore, ASC accommodates potentially stochastic choice anomalies such as the attraction effect, cyclical choice, and position effects.

Suggested Citation

  • Nobuo Koida, 2018. "Anticipated stochastic choice," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(3), pages 545-574, May.
    • Handle: RePEc:spr:joecth:v:65:y:2018:i:3:d:10.1007_s00199-016-1025-9
    DOI: 10.1007/s00199-016-1025-9
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    Cited by:

    1. Duffy, Sean & Smith, John, 2020. "An economist and a psychologist form a line: What can imperfect perception of length tell us about stochastic choice?," MPRA Paper 99417, University Library of Munich, Germany.
    2. Yves Breitmoser, 2021. "An axiomatic foundation of conditional logit," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(1), pages 245-261, July.
    3. Manzini, Paola & Mariotti, Marco, 2013. "Imperfect Attention and Menu Evaluations," SIRE Discussion Papers 2013-98, Scottish Institute for Research in Economics (SIRE).
    4. Paola Manzini & Marco Mariotti, 2014. "Stochastic Choice and Consideration Sets," Econometrica, Econometric Society, vol. 82(3), pages 1153-1176, May.
    5. Duffy, Sean & Gussman, Steven & Smith, John, 2021. "Visual judgments of length in the economics laboratory: Are there brains in stochastic choice?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 93(C).
    6. Paola Manzini & Marco Mariotti, 2015. "Modelling Imperfect Attention," Working Papers 744, Queen Mary University of London, School of Economics and Finance.
    7. Paola Manzini & Marco Mariotti, 2014. "Stochastic Choice and Consideration Sets," Econometrica, Econometric Society, vol. 82(3), pages 1153-1176, May.
    8. Duffy, Sean & Gussman, Steven & Smith, John, 2019. "Judgments of length in the economics laboratory: Are there brains in choice?," MPRA Paper 93126, University Library of Munich, Germany.
    9. Paola Manzini & Marco Mariotti, 2015. "Modelling Imperfect Attention," Working Papers 744, Queen Mary University of London, School of Economics and Finance.
    10. Tang, Rui & Zhang, Mu, 2023. "Motivated naivete," Journal of Economic Theory, Elsevier, vol. 209(C).

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    More about this item

    Keywords

    Menu preference; Position-dependence; Stochastic choice; Cognitive control; Preference for commitment; Limited attention;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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