Abstract
Most utility theories of choice assume that the introduction of an irrelevant option (called the decoy) to a choice set does not change the preference between existing options. On the contrary, a wealth of behavioral data demonstrates the dependence of preference on the decoy and on the context in which the options are presented. Nevertheless, neural mechanisms underlying context-dependent preference are poorly understood. In order to shed light on these mechanisms, we design and perform a novel experiment to measure within-subject decoy effects. We find within-subject decoy effects similar to what have been shown previously with between-subject designs. More importantly, we find that not only are the decoy effects correlated, pointing to similar underlying mechanisms, but also these effects increase with the distance of the decoy from the original options. To explain these observations, we construct a plausible neuronal model that can account for decoy effects based on the trial-by-trial adjustment of neural representations to the set of available options. This adjustment mechanism, which we call range normalization, occurs when the nervous system is required to represent different stimuli distinguishably, while being limited to using bounded neural activity. The proposed model captures our experimental observations and makes new predictions about the influence of the choice set size on the decoy effects, which are in contrast to previous models of context-dependent choice preference. Critically, unlike previous psychological models, the computational resource required by our range-normalization model does not increase exponentially as the set size increases. Our results show that context-dependent choice behavior, which is commonly perceived as an irrational response to the presence of irrelevant options, could be a natural consequence of the biophysical limits of neural representation in the brain.
Highlights
At the core of many utility theories used in social and biological sciences lies a central axiom, called independence from irrelevant alternatives (IIA)
In the second part of the experiment, we assessed the preference between jittered versions of the T and C gambles in the presence of a third decoy gamble
We propose that context effects are a natural consequence of the biophysical limits of the neural processing in the brain, as shown for other aspects of perception and choice [37,38,39]
Summary
At the core of many utility theories used in social and biological sciences lies a central axiom, called independence from irrelevant alternatives (IIA). The IIA axiom states that the relative preference between any pair of options does not depend on what other options might be present [1,2,3]. It has been shown that adding a third ‘‘decoy’’ option into a choice set often results in a predictable shift in the relative preference between the other two options of an initial pair. The decoy is an ‘‘irrelevant alternative’’ because it would never be chosen if it is dominated by another option. Introducing such a decoy results in an increased preference for the initial option that dominates the decoy [6,8,9,10], a phenomenon called the attraction effect or the asymmetric dominance effect
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