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The price of flexibility: Towards a theory of Thinking Aversion

Ortoleva, Pietro (2013) The price of flexibility: Towards a theory of Thinking Aversion. Journal of Economic Theory, 148 (3). pp. 903-934. ISSN 0022-0531.

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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.

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Additional Information:© 2013 Elsevier Inc. Received 22 November 2011; final version received 2 October 2012; accepted 3 October 2012. Available online 8 January 2013. I would like to thank the associate editor and three anonymous referees, Ozgur Evren, Paolo Ghirardato, Alessandro Lizzeri, Massimo Marinacci, Leandro Nascimento, David Pearce, Debraj Ray, Gil Riella, Todd Sarver, Anja Sautmann, Ennio Stacchetti, the participants at seminars at NYU, Society for Economic Design 2008, RUD 2009, Rice, UBC, Brown, Cornell, Caltech, Collegio Carlo Alberto, Bocconi, Luiss, Johns Hopkins, UCSD, and especially Efe Ok for useful comments and suggestions.
Subject Keywords:Cost of thinking; Contemplation cost; Bounded rationality; Preference over menus; Preference for flexibility; Choice overload
Issue or Number:3
Classification Code:JEL classification: D81; D83; D84
Record Number:CaltechAUTHORS:20130711-091921673
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Official Citation:Pietro Ortoleva, The price of flexibility: Towards a theory of Thinking Aversion, Journal of Economic Theory, Volume 148, Issue 3, May 2013, Pages 903-934, ISSN 0022-0531,
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:39301
Deposited By: Tony Diaz
Deposited On:12 Aug 2013 23:13
Last Modified:03 Oct 2019 05:05

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