Aspiration-based choice

Numerous studies and experiments suggest that aspirations for desired but perhaps unavailable alternatives influence decisions. A common finding is that an unavailable aspiration steers agents to choose similar available alternatives. We propose and axiomatically characterize a choice theory consistent with this aspirational effect. Similarity is modeled using a subjective metric derived from choice data. This model offers implications for consumer welfare and its distribution between rich and poor when firms compete for aspirational agents, and a novel rationale for sales.