Bayesian Contextual Choices under Imperfect Perception of Attributes

Junnan He (1)

1 ECON - Département d'économie (Sciences Po)

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.

Mots clés: Compromise effect; Context effect; Imperfect perception; Intransitive choices; Joint-separate evaluation reversal; Phantom decoy effect; Stable preferences.

Domaines: Economies et finances

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