Working paper: Franz Dietrich & Christian List, “Reason-Based Rationalization”

Franz Dietrich (CNRS; University of East Anglia) & Christian List (London School of Economics) have recently published online a working paper entitled “Reason-Based Rationalization“.

Abstract: We introduce a “reason-based” way of rationalizing an agent’s choice behaviour, which explains choices by specifying which properties of the options or choice context the agent cares about (the “motivationally salient properties”) and how he or she cares about these properties (the “fundamental preference relation”). Reason-based rationalizations can explain non-classical choice behaviour, including boundedly rational and sophisticated rational behaviour, and predict choices in unobserved contexts, an issue neglected in standard choice theory. We characterize the behavioural implications of different reason-based models and distinguish two kinds of context-dependent motivation: “context-variant” motivation, where the agent cares about different properties in different contexts, and “context-regarding” motivation, where the agent cares not only about properties of the options, but also about properties relating to the context.

Keywords: choice theory, rationalization, non-classical choice behaviour, bounded rationality, sophisticated rationality, context-dependence, framing, revealed preferences, prediction of choice

JEL Classification: D00, D11, D80.

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