The price of flexibility: Towards a theory of Thinking Aversion

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Abstract

We study the behavior of an agent who dislikes large choice sets because of the 'cost of thinking' involved in choosing from them. Focusing on preferences over lotteries of menus, we introduce the notion of Thinking Aversion. We characterize preferences as the difference between an affine evaluation of the content of the menu and a function that assigns to each menu a thinking cost. We provide conditions for which this cost can be seen as the cost that the agent has to sustain to figure out her preferences in order to make a choice.

Original languageEnglish (US)
Pages (from-to)903-934
Number of pages32
JournalJournal of Economic Theory
Volume148
Issue number3
DOIs
StatePublished - May 2013
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Bounded rationality
  • Choice overload
  • Contemplation cost
  • Cost of thinking
  • Preference for flexibility
  • Preference over menus

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