Choice by Rejection

Abstract: We propose a boundedly rational model of choice where agents eliminate dominated alternatives using a transitive rationale before making a choice using a complete rationale. This model is related to the seminal two-stage model of Manzini and Mariotti (2007), the Rational Shortlist Method (RSM). We analyze the model through reversals in choice and provide its behavioral characterization. The procedure satisfies a weaker version of the Weak Axiom of Revealed Preference (WARP) allowing for at most two reversals in choice in terms of set inclusion for any pair of alternatives. We show that the underlying rationales can be identified from the observable reversals in the choice. We also characterize a variant of this model in which both the rationales are transitive