A Rational Model for Individual Differences in Preference Choice

Abstract

Human preference choice suffers curious contextual effects: the relative preference between two multi-attribute options (e.g. cars with differing safety and economy ratings) can dramatically shift, depending on the presence/absence of additional options. This phenomenon defies any simple utility-based account of choice, and has been taken to imply irrationalities/sub-optimalities in human decision-making, or reflect idiosyncrasies in neural processing. Recently, we used a Bayesian model to show that these contextual effects are normative consequences of observers’ using options to learn about the “market". However, it had an unsavory implication that all decision-makers asymptotically converge to the same beliefs/behavior. Here, we propose a new model that uses both market and personal utilities to make choices. This model still captures the contextual effects, while also allowing asymptotic differences in individual preferences and providing a general framework for explaining how consumption informs one's beliefs and preferences.


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