Choice Aversion in Directed Networks
Posted: 20 May 2020 Last revised: 12 Apr 2021
Date Written: April 29, 2020
This paper studies the problem of optimal path selection in a directed network by decision makers that have an intrinsic distaste for evaluating too many options. We propose a recursive logit model that incorporates choice aversion along the lines introduced by Fudenberg and Strzalecki (2015). We derive optimal flow allocations both sequentially and from a path-choice perspective, which is robust to the presence of overlapping routes. We obtain a tight characterization of welfare in terms of both the network topology and the degree of choice aversion, where we derive comparative statics consistent with previous research.
Keywords: choice aversion, discrete choice models, directed networks
JEL Classification: D001, C00, C51, C61
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