Choice deferral, status quo bias, and matching

Abstract: This thesis consists of three independent papers. They are put in reverse chronological order according to when they were initiated. The first paper, which is a joint work with Özgür Evren, extends the standard rational choice framework with the option to postpone the act of selecting an alternative. In that paper, we propose an axiomatic model of choice over risky prospects that restricts the classical rationality axioms solely to those instances in which the decision maker does not defer. The cardinal approach we follow allows us to identify the preference relation of the decision maker over lotteries, even if the choice data is very scarce due to deferral. Moreover, we also derive the value of deferring choice from a given set of options, which turns out to be an affine utility function over choice sets. At each choice situation, the decision maker compares the utility of each available alternative with that of deferral so as to decide on opting for an alternative immediately.The second paper is a model of status quo bias with choice avoidance. It describes the choice behavior of an otherwise standard decision maker whose choices are affected by the presence of a status quo alternative. The status quo emerges as a temporary choice, which may be reversed upon arrival of new (introspective or objective) information, or upon finding new alternatives.The third paper considers the network formation problem from a matching perspective. In that paper, agents want to link with each other and each has preferences over the subsets of others. We consider various solution concepts regarding the stability of a matching between the agents, establish relations between these concepts under several preference restrictions, and provide sufficient conditions for these solutions to be nonempty.