INTRANSITIVE CHOICES BASED ON TRANSITIVE PREFERENCES - THE CASE OF MENU-DEPENDENT INFORMATION

The paper considers decision contexts in which the set of alternatives from which choices have to be made (the 'menu') may convey informatio n about the desirability of these alternatives. Our analysis is motiva ted by the fact that in specifying an appropriate description of a cho ice situation an outside observer always has to neglect some 'dimensio ns' of the decision problem. The central claim is that properties of o bserved behaviour may depend crucially on the neglected dimensions eve n when their influence is arbitrarily small. Specifically, we prove th e following result. Suppose that in a discrete choice model an agent's beliefs about the 'quality' of the available alternatives depend on t he specific menu to choose from. Then, even when the difference in bel iefs given different menus is arbitrarily small (but positive), any pr acticable description of the decision situation necessarily implies th at cyclic choices will be observed. The result suggests that transitiv ity - as a condition on observable behaviour - is rather questionable in any context where one cannot completely exclude the possibility tha t menu-dependent information may play some role.