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Choice with endogenous categorization

Ellis, Andrew ORCID: 0000-0002-7552-4832 and Masatlioglu, Yusufcan (2022) Choice with endogenous categorization. Review of Economic Studies, 89 (1). 240 - 278. ISSN 0034-6527

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Identification Number: 10.1093/restud/rdab011

Abstract

We propose and axiomatize the categorical thinking model (CTM) in which the framing of the decision problem affects how agents categorize alternatives, that in turn affects their evaluation of it. Prominent models of salience, status quo bias, loss-aversion, inequality aversion, and present bias all fit under the umbrella of CTM. This suggests categorization is an underlying mechanism of key departures from the neoclassical model of choice. We specialize CTM to provide a behavioural foundation for the salient thinking model of Bordalo et al. (2013, Journal of Political Economy, 121, 803–843) that highlights its strong predictions and distinctions from other models.

Item Type: Article
Official URL: https://academic.oup.com/restud
Additional Information: © 2021 The Authors
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles
D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General
D - Microeconomics > D9 - Intertemporal Choice and Growth > D90 - General
Date Deposited: 29 Mar 2021 08:33
Last Modified: 18 Jan 2022 08:30
URI: http://eprints.lse.ac.uk/id/eprint/109787

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