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Limited Attention as the Bound on Rationality
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Sharon Gifford
Veröffentlicht/Copyright:
5. Dezember 2005
A utility maximizing model of allocating limited attention between adopting new behaviors and adapting current behaviors generates an optimal policy that resembles commonly observed, and apparently irrational, behavioral rules. The ability to update current behaviors implies an endogenous opportunity cost of adopting a new behavior. If this cost is sufficiently high, then behaviors are less than substantively rational. However, if this high cost of attention is ignored, then behaviors are less rational than if this cost is considered. This is because more rational behaviors are updated less frequently and so economize on attention in the future.
Published Online: 2005-12-5
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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- Shocks and Business Cycles
- Identification of Preferences from Market Data
- On the Right-of-First-Refusal
- Denial of Death and Economic Behavior
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Schlagwörter für diesen Artikel
bounded rationality;
limited attention;
behavioral rules;
decision making
Artikel in diesem Heft
- Advances Article
- Asymmetric Vertical Integration
- Shocks and Business Cycles
- Identification of Preferences from Market Data
- On the Right-of-First-Refusal
- Denial of Death and Economic Behavior
- Contributions Article
- Utility Equivalence in Auctions
- Pollution Taxes for Monopolistically Competitive Firms
- On the Welfare Evaluation of Income and Opportunity
- Inefficiency of Collusion at English Auctions
- Limited Attention as the Bound on Rationality
- Topics Article
- Upward and Downward Limit Pricing: The Role of Post-Entry Competition
- Anonymous Bidding and Revenue Maximization
- Citizen Candidacy With Asymmetric Information
- Likely Events and Possible States
