This award funds research in economic theory. The research team seeks to develop a model of how individuals make decisions. They propose a framework that could be an alternative to the standard approach of modeling economic preferences. The team wants to replace this standard approach with an alternative that can better explain results from experimental and behavioral economics. They seek to develop an approach that is quite general, so that it can be applied to any economic decision. Their model will replace the simple preference relation (which ranks all alternatives) with a concept they call a preference structure. Preference structures include two relations. The first captures all rankings that the individual finds easy or straightforward. The second relation that comes from observing how the individual makes decisions between two alternatives, whether that decision is easy or hard. The goal is to provide new methods for behavioral economics. If the project provides a more accurate way to model actual decision making that can also be used to predict future decisions, it would be useful in a wide variety of practical contexts in business management and public policy.
The model of preference structures includes two binary relations. The first captures easy rankings. As cyclical choice patterns are unlikely to rise from easy pairwise choice problems, this relation is required to be transitive but not necessarily complete. The second relation is complete, but may not be transitive. The two relations are consistent. This model subsumes many preference models, such as those that allow for indecisiveness, imperfect ability of discrimination, regret, and completions based on recommendations. Moreover, there is a natural way of modeling the choice behavior induced by a preference structure by using the notion of top-cycles. This leads to a generalization of standard rational choice theory which meets three goals. It has predictive power, it has appealing existence and uniqueness properties, and it provides ways of empirically eliciting preference structures from choice data. The team plans to explore a number of avenues, from classical consumer theory to game theory. They also hope to consider decision making under risk and uncertainty.
This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.
