PRIMARY FIELDS OF SPECIALIZATION

Microeconomic Theory, Bounded Rationality, Choice Theory, Decision Theory

PUBLICATIONS

Simon's bounded rationality, with A. Giarlotta, Decisions in Economics and Finance (2024)

Abstract: This note in the Milestones series is dedicated to the paper "A Behavioral Model of Rational Choice", written by Herbert Simon, and published in 1955 on the Quarterly Journal of Economics.

Context-sensitive rationality: Choice by Salience, with A. Giarlotta, and S. Watson, Journal of Mathematical Economics (2023)(JMP)

Abstract: We describe a context-sensitive approach to individual choice, in which the explanation is provided by a family of linear orders indexed by all available items. Selection from a menu is then recovered by the classical maximization paradigm, subject to the constraint that the justifying rationale must be indexed by an item of the menu. This approach allows us to pursue two complementary goals: (1) a fine classification of all possible choices into classes of rationality, and (2) a bounded rationality model based on an ordinal notion of salience. Concerning (1), we refine the context-free model of rationalization by multiple rationales, partitioning the class of all choice functions on 𝑛 items into 𝑛 classes of rationality. The least rational class is expressive of a moody behavior, which is rare for small 𝑛, but prevailing for large 𝑛. Concerning (2), we enrich our framework by a binary relation of salience, which guides the selection process. Upon requiring that all rationales associated to equally salient items coincide, choice is explained by appealing to the unique linear order indexed by a maximally salient item of the menu. Choice by salience is a specification of choice with limited attention. Numerical estimates show the sharp selectivity of this model of bounded rationality.

Bounded rationality is rare, with A. Giarlotta and S.Watson,  Journal of Economic Theory (2022)

Abstract: Most bounded rationality properties in the literature are inherited by subchoices, but are not satisfied by at least one subchoice of most choice functions. Therefore the fraction of choice functions that can be explained by these models goes to zero as the number of items tends to infinity. Numerical estimates confirm the rarity of bounded rationality even for small sets of alternatives.

The number of boundedly rational choices on four elements, with A. Giarlotta, and S. Watson, MethodsX (2022)

Abstract: We use a combinatorial approach to identify and compute the number of non-isomorphic choices on four elements that can be explained by several models of bounded rationality.

Matlab code available here.

WORKS IN PROGRESS


Identification of consideration sets from choice data, with D. Carpentiere

Abstract: We show that many bounded rationality patterns of choice can be alternatively repre- sented as testable models of limited consideration, and we elicit the features of the associated unobserved consideration sets from the observed choice. Moreover, we characterize some testable choice procedures in which the DM considers as few alternatives as possible. These properties, compatible with the empirical evidence, allow the ex- perimenter to uniquely infer the DM’s unobserved consideration sets from irrational features of the observed behavior.


Social tensions, indecisiveness and choice deferral, with A. Giarlotta, M. Ali Khan, and F. Reito

Abstract: We propose a non-standard way to articulate  the trade-off between personal utility and social distance. In mainstream neoclassical consumer theory,  market prices and monetary income are the only determinants of individual actions, and the other  or the social  enters choice, if it enters at all, through the other's actions or his/her maximized payoffs.Furthermore, even when an agent's preferences are hitched to a social reference point, a fully decisive and immediate response is always assumed. Experimental  evidence from both psychology and economics suggests how social pressures and dissonant tensions question this immediacy. Our approach deconstructs consumer choice to  two stages: a non-decisive first stage in which  a binary relation, called one-many ordering,  yields an interval, the consideration set, to which the deferred  choice is confined; a decisive second stage in which  present utility, the distance from the average choice and future social expectations are taken into account.Finally, we embed this indecisive consumer in a game-theoretic situation.We show that indecisiveness and choice deferral may cause social losses.

The dynamics of higher-order novelties, with G. Di Bona, A. Bellina, G. De Marzo, I. Iacopini, and V. Latora

Abstract: The Heaps' law, which characterizes the growth of novelties, has triggered new mathematical descriptions, based on urn models or on random walks, of the way we explore the world. However, an often-overlooked aspect is that novelties can also arise as new combinations of existing elements. Here we propose to study novelties as n≥1 consecutive elements appearing for the first time in a sequence, and we introduce the nth-order Heaps' exponents to measure the pace of discovery of novelties of any order. Through extensive analyses of real-world sequences, we find that processes displaying the same pace of discovery of single items can instead differ at higher orders. We then propose to model the exploration dynamics as an edge-reinforced random walk with triggering on a network of relations between items which elvolves over time. The model reproduces the observed properties of higher-order novelties, and reveals how the space of possibilities expands over time along with the exploration process.

AWARDS

AMASES award for the best conference paper, University of Milano Bicocca, 2023

EDITORIAL ACTIVITY

Assistant Guest Editor for Mathematics (MDPI), special issue in "Mathematical Economics and its Applications", apply here: www.mdpi.com/si/mathematics/Mathematical_Economics_Applications, deadline for manuscript submissions 30th May 2023 

REFEREEING ACTIVITIES

Decisions in Economics and Finance, Economics and Philosophy, Journal of Mathematical Economics