Abstract
We characterize the following choice procedure. The decision maker is endowed with two binary relations over alternatives, a preference and a similarity. In every choice problem she includes in her choice set all alternatives which are similar to the best feasible alternative. Hence she can, by mistake, choose an inferior option because it is similar to the best. We characterize this boundedly rational behavior by suitably weakening the rationalizability axiom of Arrow (1959). We also characterize a variation where the decision maker chooses alternatives on the basis of their similarities to attractive yet infeasible options. We show that similarity-based mistakes of either kind lead to cyclical behavior.
Original language | English |
---|---|
Pages (from-to) | 152-156 |
Journal | Journal of Mathematical Economics |
Volume | 61 |
DOIs | |
Publication status | Published - Dec 2015 |
Keywords
- Bounded rationality
- similarity
- mistakes
- cyclic choice