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Limited consideration and limited data: revealed preference tests and observable restrictions

Author

Listed:
  • Yuta Inoue

    (Graduate School of Economics, Waseda University)

  • Koji Shirai

    (School of Economics, Kwansei Gakuin University)

Abstract

This paper develops revealed preference tests for choices under limited consideration, allowing a partially observed data set. Our tests are based on a common structure of various limited consideration models, and cover leading theories in the literature including the limited attention model, the rationalization model, the categorize-then-choose model, and the rational shortlist model. While tests involve combinatorial calculation, by applying the backtracking method, we perform simulations to numerically compare observable restrictions of various models. As a result, we find remarkable differences in observable restrictions across models.

Suggested Citation

  • Yuta Inoue & Koji Shirai, 2018. "Limited consideration and limited data: revealed preference tests and observable restrictions," Discussion Paper Series 176, School of Economics, Kwansei Gakuin University, revised Mar 2018.
    • Handle: RePEc:kgu:wpaper:176
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    File URL: http://192.218.163.163/RePEc/pdf/kgdp176.pdf
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    References listed on IDEAS

    as
    1. de Clippel, Geoffroy & Rozen, Kareen, 2021. "Bounded rationality and limited datasets," Theoretical Economics, Econometric Society, vol. 16(2), May.
    2. Paola Manzini & Marco Mariotti, 2012. "Categorize Then Choose: Boundedly Rational Choice And Welfare," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 1141-1165, October.
    3. Lleras, Juan Sebastián & Masatlioglu, Yusufcan & Nakajima, Daisuke & Ozbay, Erkut Y., 2017. "When more is less: Limited consideration," Journal of Economic Theory, Elsevier, vol. 170(C), pages 70-85.
    4. Christopher Tyson, 2013. "Behavioral implications of shortlisting procedures," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(4), pages 941-963, October.
    5. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Y. Ozbay, 2012. "Revealed Attention," American Economic Review, American Economic Association, vol. 102(5), pages 2183-2205, August.
    6. Selten, Reinhard, 1991. "Properties of a measure of predictive success," Mathematical Social Sciences, Elsevier, vol. 21(2), pages 153-167, April.
    7. Timothy K. M. Beatty & Ian A. Crawford, 2011. "How Demanding Is the Revealed Preference Approach to Demand?," American Economic Review, American Economic Association, vol. 101(6), pages 2782-2795, October.
    8. Au, Pak Hung & Kawai, Keiichi, 2011. "Sequentially rationalizable choice with transitive rationales," Games and Economic Behavior, Elsevier, vol. 73(2), pages 608-614.
    9. Paola Manzini & Marco Mariotti, 2007. "Sequentially Rationalizable Choice," American Economic Review, American Economic Association, vol. 97(5), pages 1824-1839, December.
    10. Dean, Mark & Kıbrıs, Özgür & Masatlioglu, Yusufcan, 2017. "Limited attention and status quo bias," Journal of Economic Theory, Elsevier, vol. 169(C), pages 93-127.
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    Citations

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    Cited by:

    1. Yuta Inoue, 2020. "Growing Consideration," Working Papers 2003, Waseda University, Faculty of Political Science and Economics.
    2. Yuta Inoue & Koji Shirai, 2020. "On the observable restrictions of limited consideration models: theory and application," Discussion Paper Series 217, School of Economics, Kwansei Gakuin University.
    3. Mikhail Freer & Hassan Nosratabadi, 2022. "Revealed Preference Analysis Under Limited Attention," Papers 2208.07659, arXiv.org, revised Oct 2023.

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    More about this item

    Keywords

    Revealed preference; Limited consideration; Limited attention; Rational shortlisting; Bounded rationality; Bronars test;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D1 - Microeconomics - - Household Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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