A Model of Choice with Minimal Compromise

TL;DR

This paper introduces a two-stage choice model where a decision maker uses two preferences sequentially, leading to a bounded rationality behavior that minimally compromises between the preferences, satisfying Sen's beta but not alpha axiom.

Contribution

It presents a novel choice model with two preferences, capturing bounded rationality and minimal compromise, and is the first to satisfy Sen's beta axiom without alpha.

Findings

The model characterizes a two-stage choice process with preferences.

It is the first choice function satisfying Sen's beta but not alpha.

The behavior reflects bounded rationality with minimal preference compromise.

Abstract

I formulate and characterize the following two-stage choice behavior. The decision maker is endowed with two preferences. She shortlists all maximal alternatives according to the first preference. If the first preference is decisive, in the sense that it shortlists a unique alternative, then that alternative is the choice. If multiple alternatives are shortlisted, then, in a second stage, the second preference vetoes its minimal alternative in the shortlist, and the remaining members of the shortlist form the choice set. Only the final choice set is observable. I assume that the first preference is a weak order and the second is a linear order. Hence the shortlist is fully rationalizable but one of its members can drop out in the second stage, leading to bounded rational behavior. Given the asymmetric roles played by the underlying binary relations, the consequent behavior exhibits a minimal compromise between two preferences. To our knowledge it is the first Choice function that satisfies Sen's $\beta$ axiom of choice,but not $\alpha$.