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Publication Date:
June 2011
ISSN:
1935-1704
DOI:
10.2202/1935-1704.1780

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Ed. by Cervellati, Matteo / Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Schipper, Burkhard

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Intertemporal Bounded Rationality as Consideration Sets with Contraction Consistency

Dean Spears1

1Princeton University, dspears@princeton.edu

Citation Information: The B.E. Journal of Theoretical Economics. Volume 11, Issue 1, Pages –, ISSN (Online) 1935-1704, DOI: 10.2202/1935-1704.1780, June 2011

Publication History:
Published Online:
2011-06-08

How would a boundedly rational agent react to a larger menu? I model choice from an unobservable, subjective consideration subset. Consideration sets satisfy Sen’s property alpha: larger objective choice sets can generate smaller consideration sets. The contribution of this paper is a representation of choice among menus: choice sets are only as valuable as the best item in their subjective subsets, so larger sets can be worse. Unlike people facing temptation, a boundedly rational decision maker can strictly prefer both of two choice sets to their union. This model of intertemporal choice reflects how an agent who satisfies Weak WARP would choose, if sophisticated about her bounded rationality.

Keywords: consideration set; intertemporal choice; choice theory; contraction consistency; Sen’s property alpha; Weak WARP; axioms

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