Rational Choice in Context

Abstract

Human decisions are context dependent in ways that violate classical norms of rational choice. However, these norms implicitly depend on idealized descriptive assumptions that are often unrealistic. We focus on one such assumption: that information is constant across contexts. Choice contexts often supply subtle cues—which may be embedded in frames, procedures, or menus—to which human decision makers can be highly sensitive. We review recent evidence that some important context effects reflect dynamically coherent belief and preference updating, in response to ecologically valid cues. This evidence paints a more nuanced picture of human rationality in natural choice environments and opens up prospects for nonpaternalistic forms of choice architecture.