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Adaptive stochastic search

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Aguiar, Victor H.

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We characterize Simon's (1955) search and satisficing model with an adaptive threshold and random search (SM-AT). The decision maker (DM) consistent with the SM-AT is endowed with a utility function, a random search distribution, and a deterministic but menu-dependent threshold. On any given trial, the DM searches the menu and stops whenever she finds an item with a utility level that is above the threshold. This simple choice procedure accommodates the well-known compromise and attraction effects. The SM-AT is more general than the random utility model and allows for systematic departures from regularity. Its characterization lets us differentiate adaptive satisficing behavior from random preference maximization in a (limited) standard stochastic choice data set.

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Elsevier

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Economics, Mathematics, Social Sciences, Mathematical methods

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Journal of Mathematical Economics

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10.1016/j.jmateco.2019.01.003

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