Contextual Deliberation and Preference Construction

Choices can be context dependent. This empirical finding is usually invoked to suggest that preferences are constructive and susceptible to decision environment. Yet preference construction can be systematic and endogenous. This paper develops the theory of contextual deliberation as a potential explanation for behavioral phenomena of preference construction. When preference ordering in a choice set is ex ante unknown and state dependent, decision makers can engage in information acquisition activities (i.e., deliberation) before choice to improve knowledge about the state-dependent preference ordering. Choice context can thus influence ex post preference ordering through affecting the incentive to deliberate. Consequently, contextual deliberation may lead to preference construction and give rise to seemingly irrational behavioral phenomena such as the compromise effect and the choice overload effect. The theory of contextual deliberation also yields predictions that can be empirically tested to identify from other alternative explanations.