Identifying consideration sets through search and an implementation using Shiny


Gothenburg by Night

When we analyze how people make choices, we assume taht they are rational utility maximizers. This assumption implies that people have full knowledge of their preferences, complete information about all available alternatives and an infinite ability to make trade-offs between them. These basic assumptions of economics allow us to make consistent predictions and derive welafare estimates. However, these predictions and welfare estimates are only accurate, and reliable, if people are indeed rational. The rationality assumption has been questioned by many economists and non-economists alike. Building on ideas from optimal search theory and choice modeling, we develop a model that can jointly model the search and choice processes. We derive the properties of the model and show that it can retrieve unbiased parameters using Monte Carlo simulation. We outline our experimental approach to get data to test our hypothesis using Shiny.