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Bayesian Contextual Choices under Imperfect Perception of Attributes

Junnan He

Abstract

The classical rational choice theory proposes that preferences are context-independent, e.g. independent of irrelevant alternatives. Empirical choice data, however, display several contextual choice effects that seem inconsistent with rational preferences. We study a choice model with a fixed underlying utility function and explain contextual choices with a novel information friction: the agent's perception of the options is affected by an attribute-specific noise. Under this friction, the agent learns useful information when she sees more options. Therefore, the agent chooses contextually, exhibiting intransitivity, joint-separate evaluation reversal, attraction effect, compromise effect, similarity effect, and phantom decoy effect. Nonetheless, because the noise is attribute-specific and common across alternatives, the agent's choice is perfectly rational whenever an option clearly dominates others.
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Dates and versions

hal-03878378 , version 1 (29-11-2022)

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Attribution - NonCommercial - NoDerivatives - CC BY 4.0

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  • HAL Id : hal-03878378 , version 1

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Junnan He. Bayesian Contextual Choices under Imperfect Perception of Attributes. 2021. ⟨hal-03878378⟩
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