Choice Aversion in Directed Networks

Posted: 20 May 2020 Last revised: 12 Apr 2021

See all articles by Jorge Lorca

Jorge Lorca

Central Bank of Chile

Emerson Melo

Indiana University Bloomington

Date Written: April 29, 2020

Abstract

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

Suggested Citation

Lorca, Jorge and Melo, Emerson, Choice Aversion in Directed Networks (April 29, 2020). Available at SSRN: https://ssrn.com/abstract=3588816 or http://dx.doi.org/10.2139/ssrn.3588816

Jorge Lorca (Contact Author)

Central Bank of Chile ( email )

Agustinas 1180
Santiago, RM 8340454
Chile

Emerson Melo

Indiana University Bloomington ( email )

Dept of Economics
100 South Indiana Ave.
Bloomington, IN 47405
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
515
PlumX Metrics