27 Pages Posted: 30 Jun 2009 Last revised: 31 Mar 2014
Date Written: July 1, 2010
Simonson and Tversky (Journal of Marketing Research, 1992) demonstrated that the tendency to choose an alternative is enhanced or hindered depending on whether the tradeoffs within the set under consideration are favorable or unfavorable to that option (tradeoff contrast effect). In this paper we present an axiom that formulates this effect, and show that it yields a multiple utility representation in von-Neumann-Morgenstern framework: there is a unique convex set of vN-M utilities, such that an element is chosen if and only if it is best with respect to one of the utilities in this set. Similarly, we apply this axiom to Anscombe-Aumann framework and obtain a multiple prior representation. Finally, we study the notions of indifference, indecisiveness, and being more decisive in our models.
Keywords: rational choice, multiple priors, multiple rationals, tradeoff contrast effect
JEL Classification: D81
Suggested Citation: Suggested Citation