August 2004

IZA DP No. 1239: Rationalizing Boundedly Rational Choice: Sequential Rationalizability and Rational Shortlist Methods

published as "Sequentially Rationalizable Choice" in: American Economic Review, 2007, 97 (5), 1824-1839

A sequentially rationalizable choice function is a choice function which can be obtained by applying sequentially a fixed set of asymmetric binary relations (rationales). A Rational ShortlistMethod (RSM) is a choice function which is sequentially rationalizable by two rationales. These concepts translate into economic language some human choice heuristics studied in psychology. We provide a full characterization of RSMs and study some properties of sequential rationalizability. These properties allow some degree of menu dependence in choice.