Choice with Endogenous Categorization

Abstract We propose and axiomatize the categorical thinking model (CTM) in which framing of decision problem affects how agents categorize alternatives, that turn their evaluation it. Prominent models salience, status quo bias, loss-aversion, inequality aversion, present bias all fit under umbrella CTM. This suggests categorization is an underlying mechanism key departures from neoclassical choice. specialize CTM to provide a behavioural foundation for salient Bordalo et al. (2013, Journal Political Economy, 121, 803–843) highlights its strong predictions distinctions other models.