סמינר באסטרטגיה

Speaker: Amnon Maltz, Dept. of Economics, NYU

Abstract: 

This paper develops, using the revealed preference approach, a model of choice with initial endowments and in the presence of alternatives that are grouped into categories. Our model generalizes the classical individual choice model which is rationalized by utility maximization, and reduces to that model in the absence of an initial endowment.

Given an exogenous endowment, our decision maker follows the following steps: First,

she identi
es the best alternative in the choice set which belongs to the same category as

her endowment. This alternative serves as her endogenous reference point and induces

a \psychological consideration" set. Finally, she chooses the best available alternative

in her consideration set according to her reference-free utility. The model gives rise

to a \category bias" which generalizes the status quo bias by attracting the decision

maker towards the endowment's category but not necessarily towards the endowment

itself. It also accommodates recent experimental
ndings on the absence of status quo

bias among similar goods. Finally, we empirically test and
nd support for the main

assumptions of our model