Download "A Range-Normalization Model of Context-Dependent Choice: A New Model and Evidence"

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.

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