A theory of how intransitive consumers make decisions

An assumption of transitivity is required for the existence of the utility function of classical economics. However, as argued in the first section, if acquiring and organizing information is costly, rational behavior may require that preferences be intransitive. One might therefore predict that this assumption will often be violated, and evidence is presented that this is the case. We go on to develop a model of preference which does not require an assumption of transitivity, and which can be readily implemented empirically using data on paired comparisons. Using a set of intransitivities, and the forecasting ability of our proposed model is compared with alternatives.