nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2012‒07‒01
two papers chosen by
Philip Yu
Hong Kong University

  1. Choice by sequential procedures By Jose Apesteguia; Miguel A. Ballester
  2. Asymmetrically Dominated Choice Problems and Random Incentive Mechanisms By James C. Cox; Vjollca Sadiraj; Ulrich Schmidt

  1. By: Jose Apesteguia; Miguel A. Ballester
    Abstract: We propose a rule of decision-making, the sequential procedure guided by routes, and show that three influential boundedly rational choice models can be equivalently understood as special cases of this rule. In addition, the sequential procedure guided by routes is instrumental in showing that the three models are intimately related. We show that choice with a status-quo bias is a refinement of rationalizability by game trees, which, in turn, is also a refinement of sequential rationalizability. Thus, we provide a sharp taxonomy of these choice models, and show that they all can be understood as choice by sequential procedures.
    Keywords: Individual rationality, Bounded rationality, Behavioral economics.
    JEL: D01
    Date: 2012–02
  2. By: James C. Cox; Vjollca Sadiraj; Ulrich Schmidt
    Abstract: A common methodology in experimental research is the use of random incentive mechanisms. This note investigates possible distortion induced by such mechanisms in the context of choice under risk. In the baseline (one task) treatment of our experiment we observe risk behavior in a given choice problem. We show that by integrating a second, asymmetrically dominated choice problem in a random incentive mechanism behavior can be systematically manipulated. This implies that the isolation hypothesis is violated and the random incentive mechanism does not elicit true preferences in our example.
    Keywords: random incentive mechanism, isolation, asymmetrically dominated alternatives
    JEL: C91 D81
    Date: 2012–06

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