The Extended Elimination by Aspects Procedure ∗

Standard decision theory assumes that the choice set is given. In contrast, I develop a model called ‘extended elimination by aspects’ in which decision-makers discover and analyse alternatives sequentially and choose according to a boundedly rational procedure that is based on three heuristics: ‘satisficing’, lexicographic, and elimination by aspects. I show that the proposed choice procedure can account for a set of behaviours that are not explainable by standard theory, such as cycles in choice, framing effects, and the ‘less is more’ phenomenon. Furthermore, I illustrate that extended elimination by aspects is an effective tool for the inference of decision-makers’ consideration sets. Finally, an algorithm that allows external observers to infer decisionmakers’ preferences is proposed. ∗I would like to thank Jose Apesteguia, Miguel A. Ballester, Paola Manzini, Marco Mariotti, Luigi Mittone, and the seminar participants at the University of Trento for their helpful comments, suggestions, and criticisms. †Ph.D candidate, CIFREM Interdepartmental Centre for Research Training in Economics and Management Faculty of Economics Via Rosmini, 70 38100 Trento IT. Phone +39 0461 882380. E-mail: [email protected] or [email protected].