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Licensed Unlicensed Requires Authentication Published by De Gruyter June 8, 2011

Intertemporal Bounded Rationality as Consideration Sets with Contraction Consistency

  • Dean Spears

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.

Published Online: 2011-6-8

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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